Oral Answers to Questions

FOREIGN AND COMMONWEALTH OFFICE

The Secretary of State was asked—

European Constitution

David Heathcoat-Amory: What recent discussions she has had with the German EU presidency on reviving the European Constitution.

Margaret Beckett: I have had regular discussions with my German colleagues during their presidency about many issues, including EU institutional reform—so, too, has my right hon. Friend the Prime Minister, who met Chancellor Merkel most recently on 24 April. At present, there remains no consensus among EU partners on this issue, but we will discuss it at the European Council in June.

David Heathcoat-Amory: Will the Foreign Secretary confirm that she has received a letter from the German presidency and Mrs. Merkel, suggesting how to revive the European constitution by using
	"different terminology without changing the...substance"
	and preserving part 1 of the constitution
	"with the necessary presentational changes"?
	Is not this a deceitful way to proceed? Why are these negotiations taking place in secret? Will the Foreign Secretary make an urgent statement to the House about the Government's intentions?

Margaret Beckett: There is nothing to make an urgent statement about at the moment. I do not recall the letter that the right hon. Gentleman referred to, unless he is referring to some kind of questionnaire that came round a little time ago—[Hon. Members: "Questionnaire?"] Yes. I presume that Conservative Members know what a questionnaire is: people ask us questions and we fill in the answers, so that they can get a picture of the general range of views— [ Interruption. ]

Mr. Speaker: Order. Hon. Members must let the Foreign Secretary answer in her own way.

Margaret Beckett: Thank you, Mr. Speaker.
	As I was saying, that might be what the right hon. Gentleman was referring to. It is clear that the German Government would prefer to keep as much as possible of the constitutional treaty. As the presidency, however, the German Government will have to determine where the consensus lies among colleagues in the European Union, and do their best to give effect to that. As I have said, there is at present no such consensus.

Gisela Stuart: The Foreign Secretary refers to the process of finding where consensus lies. In this House, we have found it extremely difficult to find out what the British Government's position is, never mind determining where consensus lies. Will she at least acknowledge that one of the biggest difficulties for the British Government is that there is a huge division between the needs of the countries in the eurozone, which will require greater political integration from such a document, and the needs of those that are outside it?

Margaret Beckett: I believe that we have been quite clear about this. The Minister for Europe has set out on a number of occasions the principles on which we base our approach to the issue. My right hon. Friend the Prime Minister and the Dutch Prime Minister recently made it clear that we would certainly be looking not for a constitutional treaty but for an amending treaty that did not contain the characteristics of a constitution, but which might tidy up the rules of the European Union to make it operate more effectively. With regard to whether there is a difference of approach for those countries that are members of the eurozone, I know that my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) takes a great interest in these matters, but, for my own part, I would be reluctant to say anything that encouraged the idea that there should be some kind of two-speed Europe.

Quentin Davies: Are not the mooted proposals for treaty change either so obviously in the interests of democracy and transparency, such as an increased role for national Parliaments, or so obviously in the national interest, such as reducing the numbers in the Commission while we keep a permanent seat, or reducing the current bias against us in the qualified majority voting system, that it is difficult to see how anyone could rationally want to oppose them? Furthermore, how could we possibly conceive of having a referendum on what are essentially procedural and administrative matters, or even on matters relating to personnel management and job description? If we are going to have a referendum on that kind of thing, surely we should simply put all the amendments in the Finance Bill this afternoon— [ Interruption. ]

Mr. Speaker: Order.

Margaret Beckett: Without agreeing with every syllable that the hon. Gentleman has uttered, I have to say that I find myself much in sympathy with his point of view. I would be unwise, however, to enter into what is clearly a degree of internecine warfare.

Doug Henderson: Following on from the interesting, predictable and common-sense view expressed by the hon. Member for Grantham and Stamford (Mr. Davies), does my right hon. Friend agree that it is important in the public debate to draw the distinction between the management of the European Union—especially in the Commission—and the powers of its respective bodies? Would not we make a lot more progress towards reaching consensus in this House and in the Council of Ministers if that distinction were to become more clear-cut?

Margaret Beckett: My hon. Friend makes an entirely sensible point. As the hon. Member for Grantham and Stamford (Mr. Davies) has identified, it is hard to see how a sensible person could disagree to a number of the propositions, especially the notion of an enhanced role for national parliaments. Members on both sides of the House have long called for a proper degree of greater subsidiarity. At the moment, however, it appears that not everyone wishes to draw the kind of sensible distinction that my hon. Friend is making. I suspect that we may get closer to that as people get closer to having to try to draw conclusions.

Nicholas Winterton: I am sure that the Foreign Secretary will be aware that my hon. Friend the Member for Grantham and Stamford (Mr. Davies) is out of step with the overwhelming majority of the people of the United Kingdom. Does she accept that the people of the United Kingdom do not trust the European Union and will not accept any further handover of powers to it without a referendum? I expect the Government to honour their commitment to the people of this country.

Margaret Beckett: I am slightly shocked to hear the hon. Gentleman say that the hon. Member for Grantham and Stamford is out of step with opinion, even in his own party, let alone the country, since, as he pointed out, much of what he said was simple common sense. I certainly accept that many people would be concerned if they felt that massive transfers of powers to the European Union were taking place—

Nicholas Winterton: Not some—any.

Margaret Beckett: I have some sympathy with the hon. Gentleman's concern, as I know the point of view that he has long expressed. I wonder, however, how he managed to contain himself during the passage of the Single European Act and the many steps taken by the Conservative party in government that did indeed hand over powers to the European Union.

Keith Vaz: Does the Foreign Secretary agree that what we need now is not the waving of letters by Angela Merkel, as the right hon. Member for Wells (Mr. Heathcoat-Amory) has done, but a sensible and practical discussion with our European colleagues? Given that the constitution has been defeated in the referendums so far, such a discussion will allow us to proceed with the reform agenda so that a Europe of 27 can be governed in an efficient and effective way.

Margaret Beckett: My right hon. Friend is entirely right. He will recall, as will many Members of the House, that we are committed by existing treaties to, for example, reconsider the numbers in the European Commission now that Romania and Bulgaria have joined the European Union. People are bound to consider whether sensible improvements can be made to the way in which Europe works, of a kind that have been made on several occasions in the past without a referendum having been held.

Michael Moore: It is obvious that two years in the deep freeze has done nothing to alter the flavour of this debate, in this place and elsewhere. Does the Foreign Secretary at least accept that we must have a proper public debate about the issues? Any significant changes, other than overdue institutional alterations, cannot be introduced by stealth. Will she publish the answers to the questionnaire that she has received? Will she set out clearly what parts of the existing constitutional treaty would have to be removed for the Government to believe that we had gone below the threshold at which a referendum would be required?

Margaret Beckett: As the hon. Gentleman and the House will appreciate, I am not intending to do so, as I have pointed out already that the opinion of member states has moved little hitherto. I am certainly not going to conduct, in public, negotiations that have yet to commence seriously. We have made it clear that there should not be anything that has the characteristics of a constitution. There would be merit, however, in having an amending treaty, which could tidy up some of the ways in which the European Union works— [Interruption.] Well, for example, we must consider the issue of the number of members of the Commission. There is also merit in considering whether the practical working and efficiency of the European Union can be improved in the interests of this country. We certainly have not the slightest intention of consenting to decisions that would not be in the interests of this country.

David Taylor: If my memory is correct, it is 33 years since an incoming Labour Prime Minister received an electoral boost from announcing that there would be a referendum on the United Kingdom's future in Europe. Does the Foreign Secretary believe that there is an historical parallel that might be beneficial to us? Would she urge such a course on the Chancellor, on my hon. Friend the Member for Hayes and Harlington (John McDonnell), or on my right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher)—whichever of them will lead our party in years to come?

Margaret Beckett: My hon. Friend is entirely right in saying that that was the only time when we had such a referendum. A Labour Government did indeed invite the British people to make that basic decision—which was not done by the previous Government, in breach of every undertaking that had been given. Nor did the Conservative party in office ever hold a referendum on any of the changes made to the European Union. That includes the introduction of qualified majority voting in the Single European Act and its extension to 12 areas, and its extension to—I speak from memory—some 30 areas in the Maastricht treaty. The Conservative party did not believe in referendums then, and to be perfectly frank I do not believe that it really believes in them now.

Graham Brady: I think that the Foreign Secretary acknowledged receipt of a questionnaire from the German Chancellor, Angela Merkel, which set out 12 propositions on how to proceed with the EU constitution by making presentational changes such as replacing the full text of the charter of fundamental rights with a short cross-reference having the same legal value. Will the right hon. Lady now publish the Government's response, following cross-party support for that step? Does she understand that people will view these cosmetic changes as spin and deception while the EU constitution is introduced through the back door? Will she now match our unequivocal pledge that we would give the British people a referendum on any treaty that transferred powers from Britain to the EU, whether it was called a constitution or not?

Margaret Beckett: All I can say is that the British people would be very ill-advised to take the hon. Gentleman's assurance any more seriously than they took the assurances that were given and broken in 1972.
	No, I will not publish any response that we may make to the document that has been circulated, which I presume to be the document to which the hon. Gentleman referred. It was intended to give the German presidency an overall picture of the views of member states. The hon. Gentleman is leaping to a conclusion on what will be the outcome of the discussions in a way that is wholly unjustified by the facts.

Iraq

Malcolm Rifkind: What her estimate is of the number of (a) people who have left Iraq since the invasion and (b) Iraqis who are internally displaced; and if she will make a statement.

Kim Howells: I am sure that the House will join me in expressing condolences to the family of Rifleman Paul Donnachie of 2nd Battalion The Rifles, who was tragically killed in Iraq last Sunday. Rifleman Donnachie was killed by small arms fire during a routine patrol in Basra city while he and other members of his patrol were escorting a police training team.
	United Nations agencies estimate that there are some 1.9 million Iraqis displaced internally, and up to 2 million refugees in neighbouring states. Many of those now in neighbouring states left Iraq before 2003, and there are no accurate figures on how many have joined them since then. However, the United Nations High Commissioner for Refugees estimates that currently 10,000 people are leaving their homes every week, many of them crossing into neighbouring countries.

Malcolm Rifkind: Does the Minister agree that the almost 2 million refugees who have fled Iraq since the war are, to a large extent, members of the professional and business classes in Iraq—the very people who are required if Iraq is ever to enjoy proper civil reconstruction? Given that nearly 2 million have fled as refugees, that a further 2 million are internally displaced and that hundreds of thousands have been either killed or injured—including, sadly, further British soldiers—does the Minister still argue that the British Government's policy has contributed to progress and stability in the region? Has not Iraq in fact been transformed from a rogue state under Saddam Hussein to a failed state, with appalling consequences for its own people and for the region as a whole?

Kim Howells: The right hon. and learned Gentleman makes some very good points, but I remind him that, before the invasion, Iraq was run by a fascist dictator who tortured people readily and murdered hundreds of thousands of people, not just Kurds but fellow Arabs, and that many people had already left the country. This is not a comment on the right hon. and learned Gentleman or his question, but it seems to me that the silence that existed before the invasion of Iraq about the behaviour of Saddam Hussein is in stark contrast to the sudden interest and the protests about Iraq now.

David Anderson: It is two years since the Iraqi Government seized the assets of the Iraqi trade unions, three months since three raids were carried out on the offices of the trade unions by US troops and a month since the leader of the mechanics union in Iraq was assassinated after being tortured. Will the Minister agree to meet me and representatives of the trade unions in Iraq to try to find a way forward, because at the moment our policy towards the trade unions in Iraq is not working?

Kim Howells: I disagree with my hon. Friend. Our policy towards trade unions has been very supportive because they are a key part of civil society and are building the new society in Iraq. We must ensure that the sectarians who are killing trade unionists and those who for their own reasons are opposing democratic trade unionism in Iraq, are opposed. They are opposed regularly by the British Government and by our diplomats in Iraq.

Bob Spink: Does the Minister agree that there has been excellent progress socially, economically and politically in the other Iraq—Iraqi Kurdistan? Does he also agree that, in order to maintain that progress and to guarantee the stability of populations and the return of internally displaced persons, the Kirkuk referendum must go forward later this year, without any interference, either internal or external, or delay?

Kim Howells: The British Government certainly have no intention of interfering in any way in the referendum on the future of Kirkuk. I know that the hon. Gentleman is very interested in the Kurdish-administered part of Iraq and that he wants the referendum to go ahead. So do the British Government, but we want to ensure that that referendum is carried out properly and in a clear fashion, and that it is as inclusive as possible. As he knows, many allegations have been made about gerrymandering and the rest of it, so the referendum has to be seen to be as clean as possible. This is potentially a volatile area and we have already seen some jihadists and insurrectionists moving out of Baghdad to Kirkuk and murdering people with their suicide bombers. It is an important issue. We will do all that we can to ensure that the referendum is properly conducted and benefits the people of the Kurdish north and the people of Iraq in general.

Jim Sheridan: Does my hon. Friend agree that the information that has been sought by the right hon. and learned Member for Kensington and Chelsea (Sir Malcolm Rifkind) is exactly the propaganda information that the insurgents in Iraq are seeking? Will my hon. Friend confirm that those killed or displaced in Iraq are not being killed or displaced by allied forces?

Kim Howells: That is an important point. Sometimes it seems as if we are killing those tens of thousands of people. They are being killed by sectarians: there are Sunni on Shi'a murders, and Shi'a on Sunni murders. Sometimes the murders are committed in Basra by criminal gangs, who are making millions out of smuggling petroleum products. My hon. Friend is right to highlight that. The British armed forces in Iraq are trying their best to make that country a much more stable and prosperous place than it is now. I believe that they will succeed when the Iraqis themselves have the will to take on that fight to provide the security that their people need. That is why we are helping, in very difficult circumstances, to train Iraqi policemen and soldiers.

Keith Simpson: Following on from what has been said about the tens of thousands of people who are now leaving Iraq and the internal conflict there, what prospect does the Minister think there is of the Iraqi Government hanging together in the near future given the enormous strains that are now on both Sunni and Shi'a members of that Government? What pressure can the British Government bring to bear on the Iraqi Government to take this matter forward? If it is not taken forward, there will be a complete collapse of political credibility in Iraq.

Kim Howells: The hon. Gentleman is right: this is about political credibility and national reconciliation, and about how that Government can become more inclusive—how they can represent not only Shi'as but Sunnis, and also Assyrian Christians, Kurds and everyone else who makes up that huge nation. I believe that that can be done. In the constitutional review that is under way in Iraq there will have to be imaginative thinking about, perhaps, forms of devolution and about trying to understand how it might be possible to reconcile the different pressures that there are in Iraq at present. That can be done, and in recent weeks Prime Minister Maliki has expressed a desire to do just that—to make the Iraqi Government a more inclusive Government who reach out to encompass all parts of society.

Gulf War

Ben Chapman: What discussions she has had with the UN on the request for part of the money paid to people detained in Iraq during the first Gulf War to be repaid.

Kim Howells: My right hon. Friend the Foreign Secretary has not had any discussions with the United Nations about the request to recover overpayments to claimants identified in the 2006 audit of the United Nations Compensation Commission. Her Majesty's Government, along with other permanent members of the governing council of the UNCC, agreed to the adoption of a "best efforts" approach to recover overpayments. We are taking such an approach in contacting concerned claimants. We are aware, however, that in some cases it will be difficult for claimants to repay the money, and we will handle them with due concern for the claimants' welfare.

Ben Chapman: But does my hon. Friend understand that these were payments, modest ones, made 17 years ago to those detained against their will in the first Gulf war? My constituent, Chris Shaw, received a payment of £9,000 and is now being asked to repay £1,300 within 30 days. Is that not shameful, and ought it not to be written off?

Kim Howells: I certainly think that, in the case of my hon. Friend's constituent, that is an unreasonable demand. However, I am sure that he knows that there have been UNCC-approved compensation awards totalling $52 billion to 1.5 million claimants worldwide, and so far $21.8 billion has been paid out. That amounts to 5 per cent. of Iraqi oil revenues. The figures for Britain are that 5,000 United Kingdom claimants have received awards totalling $428 million. Those are large sums, but I take on board my hon. Friend's point and, as I said, where there are difficulties we must look carefully at the demands and where possible ask that the most difficult payments be written off.

UK-Islamic Relations

Greg Hands: What recent assessment she has made of UK relations with the Islamic world.

Margaret Beckett: The United Kingdom has strong relations with Muslim-majority countries and communities, through our governmental, people-to-people, cultural, educational, trade and other links. Based on shared values and interests, we are working together for a safer, more just and more prosperous world for all, addressing the common challenges that face us all, such as development, terrorism and climate change.

Greg Hands: Turkey is crucial to our relations with the Islamic world. What specific steps is the Foreign Secretary taking to follow up on the statement of the Prime Minister earlier today on the political crisis in Turkey, and would intervention by the Turkish army in the selection of a new President of that country result in the UK dropping its support for Turkish European Union membership?

Margaret Beckett: Irrespective of our approach to Turkish EU membership, everyone must recognise that it is highly undesirable for armed forces to interfere in a democratic process. We would certainly discourage that, and we have done so very firmly with the Turkish military.

Emily Thornberry: Does my right hon. Friend agree that another very important Islamic country is Bangladesh? In the light of recent developments such as the warrant for the arrest of one of the major political leaders and the house arrest of another, the putting off of elections and the increasing dominance of the military, will she look again at Britain's support for the interim Government?

Margaret Beckett: We do of course keep a careful eye on the position in Bangladesh and recognise the concerns that my hon. Friend identifies, and I hope that she will recognise that there was great anxiety about the position in Bangladesh before the caretaker Government were appointed. Throughout the state of emergency and in our engagement with that Government, we have emphasised the need to balance concerns about stability and security with respect for individuals' rights and democratic processes. We have urged them to put in place the circumstances and conditions that will lead to well run, free and fair elections, to recognise that concern exists about the timeline identified for those elections, and to recognise that there is a great deal of work to do before they can be carried out in a way that could meet suitable standards.

Robert Walter: May I return to the question of Turkey, which is our most important ally in the Islamic world, and ask the Foreign Secretary, given that the nominee for the presidency of Turkey is her opposite number—the Turkish Foreign Minister, Mr. Gul—whether she has congratulated him on his nomination or counselled him otherwise?

Margaret Beckett: I would never venture to counsel even as good a friend as Abdullah Gul as to how he should judge his political career. This is of course a matter for the people and the democracy of Turkey, and our chief hope and concern is that it should be democratically and peacefully resolved.

David Winnick: Is it not interesting that on Sunday hundreds of thousands of people demonstrated in Turkey in defence of the republic and of freedom, and against the nightmare of a religious-run state? Should we not congratulate all those who demonstrated and all their supporters on the fact that Turkish freedom and democracy will not be undermined?

Margaret Beckett: My hon. Friend makes a very powerful point. As I said to the hon. Member for North Dorset (Mr. Walter), it is of course right and proper that people make their views known, and in peaceful ways that contribute to the democratic outcome that we all hope to see.

William Hague: Events since the last Foreign Office questions have underlined that our most difficult relationship in the Islamic world is with Iran. Should we not do everything we can to make it clear that Iran can have a normal relationship with the western world if it suspends nuclear enrichment and some other activities, but that if it does not the United Kingdom will ask other EU countries to join the United States in taking progressively more serious economic and financial action against Iran—on access to the banking system, export credits and investment in oil and gas fields—so that the maximum peaceful pressure can be applied against nuclear proliferation, before it is too late?

Margaret Beckett: I agree with every word that the right hon. Gentleman has just uttered. He is right to say that it is very important not only that we maintain pressure on Iran to realise that there is a price to be paid for continuing on her present route, but that we do so in concert with our partners. He may be aware that at the last meeting of the General Affairs Council it was agreed that the European Union will indeed fully implement, and go slightly further than is demanded by, the previous UN sanctions resolution. We shall continue to urge our colleagues to maintain that firmness.

William Hague: Given that approach by the European Union, is the Foreign Secretary happy with the recent agreement by the Austrian energy firm OMV to develop Iran's Pars gas field? Is not the view of the US State Department, which said,
	"perhaps this is not the most appropriate time to be making or committing to making large investments in the Iranian oil and gas sector",
	one that should be shared throughout the European Union?

Margaret Beckett: I understand the concern that the right hon. Gentleman raises. Although this is of course a matter for the Government of Austria, we do have some concerns about whether we are all trying to make the right kind of decisions, in the context of the overall background to which he refers. As I say, it is a matter for the Austrian Government, but there will no doubt be others who share the concern that he—and, indeed, the United States Government—have expressed.

Gordon Prentice: There are only three or four fully functioning democracies in the 44 states of the Islamic world. Why should that be the case?

Margaret Beckett: That is a very interesting question—to which, I fear, I do not feel inclined to try to give a full answer in the middle of Question Time.

High Commission (New Delhi)

Peter Luff: If she will make a statement on the future accommodation and offices of the UK high commission in New Delhi.

Kim Howells: The FCO's estate in New Delhi provides efficient office and residential accommodation for our staff and those of other Government Departments. We do, of course, keep our estate strategy in New Delhi, as elsewhere, under constant review.

Peter Luff: Given the ties of history that bind our two nations and the economic and political significance of India to this country and the wider world in the 21st century, does the Minister agree that it is desirable that the British high commissioner to New Delhi should continue to reside at 2 Rajaji Marg as he does at present? If it is impossible to negotiate a commercial deal with the Indian Government to enable him to do so, will the Minister give me a categoric assurance that the new residence will be of sufficient prestige to demonstrate to the Indians and the wider world how seriously we take that relationship?

Kim Howells: I very much hope that our high commissioner stays there, if only for the architectural value of that beautiful building, which also has a beautiful garden. In 2006, 7,500 guests were entertained at the residence, including the hon. Gentleman. I do not know what wine he enjoyed, but I know that the wine is as good as the architecture.

Ken Purchase: Notwithstanding property wrangles, the Minister will be anxious to reassure the House that the services rendered by our post there continue apace, not least the consular services, especially in the light of the continuation in custody of my constituent, Panjab Singh, who has been held since Christmas eve by the authorities in the Punjab, without proper trial. It is strongly suspected that he has been mistreated. I know that the consular services are working hard, but will the Minister assure me that every effort will be made to assist my constituent, as happens in every other case of such difficulties in the sub-continent?

Kim Howells: I can certainly give my hon. Friend that assurance. India is an extremely important country for the UK and we will do everything we can to continue with the excellent consular services that are provided. It is a complex country and, as my hon. Friend knows, there is considerable devolution to the states that make up India, which has, on occasion, resulted in great difficulties in some consular cases, including the one he raises.

Climate Security

Adrian Bailey: What assessment she has made of the outcomes of the recent UN Security Council debate on energy, security and climate; and if she will make a statement.

Margaret Beckett: The UN Security Council debate was a landmark event. The participation of 55 countries was an all-time record for a thematic debate. The vast majority of those who participated recognised climate security as an issue of immediate international concern. That should add momentum to the UN negotiations to galvanise collective action.

Adrian Bailey: Does my right hon. Friend agree that much of the debate about climate change so far has been understandably couched in terms of the humanitarian consequences of failure to address it? However, the security implications of failure to deal with the humanitarian issue are profound and important. Can she make an assessment of how far the international community has appreciated that and taken it into account in developing policies to combat climate change?

Margaret Beckett: My hon. Friend is right. It would be fair to say that we have been in on the early stages of recognition by the international community of the security implications of that challenge. As he may know—and, by coincidence, on the very day of the debate in the Security Council—a group of retired American generals and admirals published their own assessment of the security issue, describing climate change as
	"a threat multiplier for instability in some of the most volatile regions of the world."
	They also identified it as a security risk to the United States, as it is to the whole world.

Andy Reed: Is it not the case that the countries that will be most affected by the first changes in climate will be the poorest, such as Bangladesh, where large parts of the country will disappear? What assessment has my right hon. Friend made of the possibility of some 100 million refugees pouring out of some of the poorest countries and the security implications not only for the surrounding countries, but the regions in which they sit?

Margaret Beckett: My hon. Friend is entirely right, and the country that he uses as an example—Bangladesh—is an area where substantial movement of people is causing security difficulties. However, I advise him and the whole House that a range of different threats have much the same effect. For example, there is great concern about the implications that difficulties with the flow of the River Nile would have, both in Egypt and all along its course, and about the pressures caused by the possible migration of millions of people. My hon. Friend is therefore right to identify such challenges. It is very important that the countries of the world work together to adapt to the changes that are already inevitable and to head off those that are not, as they might be even more damaging.

Middle East

Andrew George: What recent discussions she has had with her counterparts in those countries with an interest in the middle east peace process.

Margaret Beckett: I am in regular contact with my EU, US, Israeli, Palestinian and Arab counterparts, as well as with other international partners, to discuss ways to move the peace process forward. I most recently discussed that with my EU counterparts at the General Affairs and External Relations Council on 23 April.

Andrew George: On this 10-year milestone of the Government's election, what does the Foreign Secretary believe has been the most successful contribution that Britain has made to achieving lasting peace in the middle east, and what has been the least successful?

Margaret Beckett: I am not sure that it is very fruitful to assess Britain's contribution in that way. Over the past 10 years, all my predecessors in this post, and my right hon. Friend the Prime Minister, have made a most determined effort to do everything possible to move the middle east peace process forward and to identify the potential of the road map. My right hon. Friend the Prime Minister displayed the same determination in respect of the Northern Ireland peace process. At present, there is an opportunity to move the road map process forward, with regular meetings taking place between President Abbas and Prime Minister Olmert. That opportunity could slip away, but many people from all parts of the world are determined to try to work together to get a good result.

Gerald Kaufman: Now that an independent judicial inquiry has exposed the reckless culpability of Israeli Prime Minister Ehud Olmert—his popularity rating is now 2 per cent.—in bringing about an invasion of Lebanon that killed 1,200 Lebanese and 160 Israelis without achieving any of its objectives, what action is being taken by my right hon. Friend and her road map and other partners to require the Israeli Government to comply with the UN Security Council resolutions that that Government have violated consistently?

Margaret Beckett: My right hon. Friend is referring to the interim report of the Winograd committee, which is, of course, a matter for the Israeli Government. Of course I recognise that a series of international resolutions have made various calls on different participants in the middle east. The Government are determined to do everything we can to support the peace process and move it forward, as in the end that could provide the answers to many of the questions that my right hon. Friend has raised.

Geoffrey Clifton-Brown: Will the Foreign Secretary utterly condemn those who have been holding the BBC correspondent Alan Johnston for the past 50 days? Will she join me in sending a message of sympathy to his family, colleagues and friends at this very difficult time? She will know that the whole House will support her in any effort that she makes to secure his release, but can she give us any additional information this afternoon—for example, about who might be holding Mr. Johnston? What discussions has our high commissioner in Jerusalem had with President Abbas about this matter?

Margaret Beckett: First, I am sure that the whole House will want to express its sympathy and concern for Alan Johnston and his family. He has been most cruelly treated, despite his long-standing friendship with, and support for, the people of Palestine. We are certainly doing all we can to work with his employers, the BBC, and with his family and other interested parties to try to be effective in obtaining his release.
	There is little I can say to the hon. Gentleman about the situation. There are people who, it is thought, are likely to be holding Mr. Johnston, although they deny it. Every effort is being made at every level. My hon. Friend the Minister for the Middle East raised the matter when he chaired the Security Council recently, and the hon. Gentleman may know that the Prime Minister of the Government of national unity, Prime Minister Haniya, said only yesterday that he and his colleagues are also working quietly, but actively, to try to release Alan Johnston. Everyone is doing everything they can and we will continue to do so. I know that the hon. Gentleman understands that sometimes such things are better conducted more in private than in public.

Mark Lazarowicz: One of the continuing obstacles to the middle east peace process is the presence of illegal settlements in the occupied territories. Notwithstanding the limited withdrawals from Gaza not long ago, the evidence is that the rate of increase of settlements on the west bank is growing; in fact, some settlers removed from Gaza are taking on new settlements in the west bank. What are the Government doing to increase pressure on Israel to stop the growth of illegal settlements in the occupied territories, which is now clearly undermining the peace process?

Margaret Beckett: I am not aware of evidence that suggests that the pace of settlement expansion has increased, but we absolutely share my hon. Friend's view in opposing any extension of settlements. We believe that they should be halted and that any construction barrier beyond the green line should also be halted. Both are contrary to international law and run the risk, whatever anyone's intention, of creating so-called "facts on the ground", which could impede the peace process. That, too, is something we deplore, as we have made very plain and will continue to do so.

Iraq

John Baron: What her Department's involvement was in the production of the dossier on Iraq's weapons of mass destruction in September 2002; and if she will make a statement.

Kim Howells: Matters relating to the dossier on Iraq's weapons of mass destruction have been examined in great detail by the inquiry led by Lord Hutton, Lord Butler's "Review of Intelligence on Weapons of Mass Destruction" and the Intelligence and Security Committee's report "Iraqi WMD—Intelligence and Assessments". The Foreign and Commonwealth Office co-operated fully with those inquiries and FCO officials gave evidence to them.

John Baron: In answer to my written questions, the Foreign Secretary has again refused either to publish the draft dossier, written by John Williams, a press officer in her Department, on 9 September 2002, or to explain why those papers were not made available to the Hutton inquiry. The reason cited for the refusal is national security, but how can the Minister justify that cloak of secrecy when the paper was a draft document intended for publication, and when previous and subsequent drafts have been made available? Or is the real reason because the Williams draft was the first to mention the 45-minute claim and was the basis for John Scarlett's draft the following day?

Kim Howells: Lord Hutton had access to all documents he wished to see.  [ Interruption. ] Both John Scarlett and John Williams— [ Interruption. ]

Mr. Speaker: Order. Mr. Wishart, you are out of order. In no circumstances should you keep shouting at a Minister.

Kim Howells: That is right—Ministers like me get sensitive about it.
	Both John Scarlett and John Williams referred to the draft dossier in their evidence sessions. There is, therefore, no question of its existence being hidden from the inquiry.

Alistair Burt: When Colin Powell gave evidence to the United Nations Security Council was he fully aware of all the hesitations and qualifications in the intelligence community behind the dossier, which only subsequently became apparent?

Kim Howells: I cannot answer for Colin Powell, or for anybody in the American Administration.

Paul Flynn: I do not want to tread on the Minister's sensitivities but he should recall that of the four inquiries two were by Committees that were cheerleaders for the Iraq war and the other two dealt only with certain parts of the evidence. We have not had a full inquiry. That dossier was a disgrace. It was presented as evidence to the House on which a decision was taken to take this country to join in Bush's war in Iraq. If the evidence in the document was true, I do not believe—

Mr. Speaker: Order. I have not heard a question so far, but I think the Minister will try to reply.

Kim Howells: Thank you for that, Mr. Speaker, as I did not hear a question either and I would certainly not recognise the two Committees as being "cheerleaders" for any war. They were filled with very distinguished Members of this House and the other place, so I think that my hon. Friend does them a great disservice.

European Constitution

Andrew Selous: If she will make a statement on plans to hold a referendum on the EU constitution.

Stephen Hammond: By what criteria she will reach a view on whether a referendum should be held on any new EU constitutional treaty.

Geoff Hoon: There is at present no consensus among EU partners on the way forward regarding the constitutional treaty or, indeed, any new treaty. Those issues will be discussed at the European Council in June. The Government's approach to the discussions was set out in my written ministerial statement of 5 December 2006. As my right hon. Friend the Prime Minister said on 16 April this year, we should return to the idea of a conventional amending treaty that makes a European Union of 27 work more efficiently and focuses on its citizens' priorities. However, as we have made consistently clear, if the constitutional treaty comes back in its present form, the Government would want to hold a referendum.

Andrew Selous: Does the right hon. Gentleman agree that it is not up to this Parliament, still less Ministers, to transfer any further powers from Britain to the European Union without the express agreement of the British people given in a referendum.

Geoff Hoon: I will surprise the hon. Gentleman because I looked for some help and advice on this issue from the Opposition Front Bench. I received some useful advice from the right hon. Member for Richmond, Yorks (Mr. Hague), who voted against holding a referendum on the Maastricht treaty on 21 April 1993—as, incidentally, did the right hon. Member for Wells (Mr. Heathcoat-Amory), who asked a question earlier. That is significant because the Maastricht treaty established the European Union, as we now call it. It made significant amendments to the European treaties and, in that light, clearly affected the relationship between Westminster and Brussels, which is what the shadow Minister for Europe has been talking about. It introduced a common foreign and security policy, a European security and defence policy, a new competence for the EU in respect of co-operation in the field of justice and home affairs, qualified— [Interruption.]

Mr. Speaker: Order. The Minister has made his point.

Stephen Hammond: On 20 March in response to my question, the Minister said that the Government's policy had not changed and that if the constitutional treaty returned,
	 "there would be a referendum"—[ Official Report, 20 March 2007; Vol. 458, c. 679 .]
	Yet on 20 April, the Prime Minister, when asked by  Le Monde whether the modified treaty would be put to a referendum, said: "No. That is clear." The Government's position has changed, so who is correct—the Minister or the Prime Minister?

Geoff Hoon: The Government have been quite consistent on this issue. We made it clear that, because of the constitutional nature of the constitutional treaty, it would require a referendum. Again, however, the hon. Gentleman should check with his own Front Benchers precisely what the Government's policy should be. We have been asking them to set out their position, but unfortunately, the right hon. Member for Richmond, Yorks— [Interruption.]

Mr. Speaker: Order. We cannot hear the Minister. We need to be able to hear him.

Geoff Hoon: The right hon. Member for Richmond, Yorks has changed his view quite dramatically. I suspect that he changed it 10 years ago—indeed, on 1 May 1997, when he went from being a Cabinet Minister into opposition.

Lindsay Hoyle: Will my right hon. Friend ensure that there will be no EU constitution without a referendum in this country? The public out there are absolutely fed up with the creeping transfer of powers to Europe. We need a referendum: will my right hon. Friend give us that guarantee today?

Geoff Hoon: I have already given the House an assurance that if the constitutional treaty returns in its present form, the Government would seek to hold a referendum.

Mary Creagh: Will my right hon. Friend resist the siren calls from both sides of the House for this constitutional referendum? May I say how pleased I am that there will not be one? If we are to join together in Europe to tackle the challenges of migration, terrorism, immigration, threats to public health and climate change, we need to work together incrementally to do so. I ask my right hon. Friend not to take any lessons from Conservative Members, whose sole promise to pull out their people from the European People's party has been delayed while they find someone to sit with.

Geoff Hoon: I am grateful to my hon. Friend. She has pointed out the total inconsistency of the position adopted by the Opposition. That position varies according to whether they win or do not win elections. There is no principle involved, as far as the right hon. Member for Richmond, Yorks is concerned; it is simply tactical opportunism.

Daniel Kawczynski: The Minister may be aware that a large group of Labour and Conservative MPs, together with professors and academics, have formed the national campaign for a referendum, of which I am chairman. What words of encouragement will he give to that important body?

Geoff Hoon: I must apologise to the hon. Gentleman: I must have missed the press release announcing the significant elevation that he has achieved. I take this opportunity of congratulating him on his appointment and I look forward to the long discussions that he will have with the right hon. Member for Richmond, Yorks on referendums.

Julian Lewis: The Minister has said that if the constitution comes back, there will be a referendum. The leaked letter that Chancellor Merkel sent to the Prime Minister and other heads of European countries makes it quite clear that the only differences that are going to be proposed are purely presentational ones. Therefore, will we have a referendum if the Merkel proposals go forward?

Geoff Hoon: It is always difficult to comment on a draft document—

Julian Lewis: It is a letter.

Geoff Hoon: The hon. Gentleman refers to it as a letter, as I think did the right hon. Member for Wells earlier. I have seen a series of questions that the German presidency has raised. Those questions are not necessarily answered in the document. I am sure that the hon. Gentleman logically recognises that, being no more than questions, they are not necessarily indicative of anyone position's at present.

European Constitution

Ann Winterton: What progress has been made in discussions on a new EU constitutional treaty; and if she will make a statement.

Geoff Hoon: I have had regular discussions with my German colleagues during their presidency—so too has my right hon. Friend the Foreign Secretary and my right hon. Friend the Prime Minister, who met Chancellor Merkel most recently on 24 April. Our discussions cover many issues, including the way forward on institutional reform. As my right hon. Friend the Foreign Secretary has made clear, there is no consensus at present among EU partners on this issue. This will obviously be discussed further at the European Council in June.

Ann Winterton: Can the Minister confirm that, if there is a European Union constitutional treaty, its provisions can be implemented in the United Kingdom only through an Act of Parliament and, irrespective of the outcome of any referendum, that Act of Parliament remains paramount?

Geoff Hoon: The constitutional position is slightly different from that, but I will not argue the detail. Where any international treaty requires changes in domestic law, in order to be implemented such a treaty has to be ratified by parliamentary process.

UK-Iran Relations

Desmond Swayne: What recent assessment she has made of the UK's relations with Iran.

Kim Howells: Our relationship with Iran is under review.

Desmond Swayne: What sanctions are yet in preparation?

Kim Howells: As I am sure that the hon. Gentleman knows, there are a number of sanctions already in place—mainly those that cover the Iranian banking system and the movement of capital through this country. Those are the most important ones in my opinion.

Brian Jenkins: My hon. Friend the Minister is no doubt fully aware of the part that Iran can play in our struggle in Afghanistan. It is rather ironic that we need the good offices of that country at the present time.

Kim Howells: Iran is playing a role in Iraq. There is no question about it. I would not say that it was an entirely benign one. We know that there are guns and ammunition that have already been taken into Afghanistan, in a curious relationship between the Iranian Government—or at least some part of the Iranian Government—and perhaps al-Qaeda groupings in Afghanistan. I agree with my hon. Friend that it is important that we keep a close eye on that situation to ensure that it does not develop any further.

Somalia

Kerry McCarthy: What assessment she has made of the prospects for a resumption of peace talks in Somalia; and if she will make a statement.

Ian McCartney: I bought a new suit for the occasion, but nearly missed out on making a contribution.
	We welcome the lull in fighting in Mogadishu in the last few days and hope that a lasting ceasefire can now prevail. We want a political process pursued that can deliver lasting peace and stability and allow for much-needed humanitarian relief. The Government's annual development and humanitarian programmes provide £21 million for Somalia, and the UK has provided a further £3.5 million of humanitarian assistance following the fighting in recent months. We expect Somalia's transitional federal Government to show leadership and commitment in reaching out to all parts of Somali society and to intensify their dialogue with the clans in Mogadishu.

Kerry McCarthy: I thank the Minister for that response. Does he agree that considerable concern is growing about the role of the Ethiopian troops, and particularly about some of their activities in and around Mogadishu, and does he agree that we ought to do all that we can to support a political, rather than a military, solution?

Ian McCartney: My hon. Friend is absolutely right. That is why we have engaged in the way that we have done. In particular, we need a settlement that ensures that the Ethiopians leave the country, but in such a way that there is common agreement by all concerned not to return to the situation of the past few months, and the damage that it has done to the individual citizens of that country.

Medical Training Application Service

Patricia Hewitt: With permission, Mr. Deputy Speaker, I will bring the House up to date on the two security breaches of the medical training application service, MTAS, that arose last week.
	As I explained in a written statement to the House last Friday, on Wednesday 25 April, a serious breach of security protection occurred on the MTAS website. To enable the necessary pre-employment checks to be carried out, personal details of medical graduate applicants for foundation programme posts were made available to the postgraduate deaneries on dedicated web pages. The information was loaded on to the site at about 8.30 am and the deaneries were notified of the relevant web page address for their area at 9.30 am. In making the information available to the deaneries, the MTAS contractor, Methods Consulting, failed to provide the usual and essential password security protection.
	At about 2 pm, "Channel 4 News" became aware of the situation. At 4.35 pm "Channel 4 News" telephoned the Department of Health press office to inform it of the security breach. The Department checked the position and informed the contractor, who immediately arranged for all the personal details to be removed from the site. That was completed by 5.15 pm. The Department's security team undertook an immediate initial investigation, which has established that information on foundation programme applicants was accessed from just 21 different internet addresses, mostly belonging to postgraduate deaneries.
	The overwhelming majority of individual accesses before the security breach was closed came from an internet address belonging to ITN, the providers of "Channel 4 News". The access by ITN began at about 2 pm and ceased at about 5 pm. More than two hours elapsed between ITN and "Channel 4 News" starting to access personal information and "Channel 4 News" actually notifying the Department of the security breach.  [Interruption.] There is no evidence that members of the public or other commercial interests, apart from staff at ITN and "Channel 4 News", accessed the site. None the less, it was an extremely serious breach of security, as well as a breach of contract between the IT provider and the Department of Health. The company concerned has taken appropriate action in relation to its staff, and it fully co-operated with our security investigations. We have already reported the situation to the Information Commissioner. I will also report it to Ofcom and draw it to the attention of the chairman of Channel 4 and ITN.
	The following day, Thursday 26 April, it became apparent that junior doctor applicants, who have secure access to MTAS, could randomly access another candidate's messages on the messaging facility—used, for instance, to inform candidates about interview appointments—by varying the digits of their own message reference. It appears that, although the content of the message could be accessed, details of the sender and recipient could not be accessed. The Department of Health was advised of this second problem at 3.45 pm on Thursday and informed the contractor, which closed the messaging facility. The whole site was then suspended just after 5 pm and remains suspended.
	In view of the two lapses, the IT contractor, Methods, immediately appointed an approved security company, MWR InfoSecurity, to carry out a full security review and penetration testing. Some weaknesses were identified and MWR InfoSecurity has been working with the contractor to rectify them. However, to provide further reassurance, the national technical authority for information assurance, Communications Electronic Security Group, is also advising the Department, and the MTAS site will be re-opened as soon as we have the necessary security assurances.
	Those two security breaches were utterly deplorable. They should not have happened and appropriate steps are now being taken. However, there is no evidence that members of the public or other unauthorised people, apart from ITN and "Channel 4 News"— [Laughter.] I am very sorry that the Opposition regard this as a matter of such enormous levity. There is— [Interruption]

Mr. Deputy Speaker: Order. The Secretary of State must be allowed to proceed with her statement so that all Members of the House can hear what she is saying.

Patricia Hewitt: Thank you, Mr. Deputy Speaker. There is no evidence that members of the public or other unauthorised people have in fact accessed personal information on MTAS. Furthermore, no applicant for the foundation programme or specialist training will be disadvantaged because of the two security breaches.
	Already, following the recommendations of the review group chaired by Professor Neil Douglas, junior doctors have been offered the opportunity to change their training preferences. Following successful testing by junior doctors from the British Medical Association and the Academy of Medical Royal Colleges, nearly 26,000 specialist training applicants have reviewed their initial preferences and either revised or confirmed them. That process took place between 20 and 23 April, using MTAS, without security or technical problems. Where issues arose about a candidate's ineligibility, they will be resolved by the relevant deanery, which determines eligibility.
	As a result of the changes made to application preferences by junior doctors, around 15,500 additional interviews will be offered in England during the extended round 1. Although some interviews will be delayed because of the security problems, we still expect them to be completed by early June.
	There is no doubt that confidence in the applications system, MTAS, has been further damaged by these deplorable security breaches. That is why the Department and I are taking them extremely seriously and taking appropriate action. I apologise again to junior doctors or foundation programme applicants who have been caused anxiety or, in some cases, inconvenience as a result. I will, of course, continue to keep the House informed of further developments.

Andrew Lansley: Once again, the Secretary of State has had to make a statement to the House about the appalling shambles that has become the Government's system of selecting training for junior doctors. I am sorry that the Secretary of State could not bring herself to say sorry.  [Interruption.] It is interesting that in the copy of the statement that she sent to me beforehand, the word "sorry" does not appear at all.
	The right hon. Lady must understand that the most outrageous security breach has occurred. It is astonishing that in her statement she did not tell the House what kind of data we are talking about—not only the application, but personal details, address details, references, the religious denomination of the applicants, their sexual orientation and full details of their criminal records check, including previous police records. It is astonishing that such an outrageous security breach could have happened.
	The Secretary of State has not yet told us on what basis the breach occurred and what the consequences are. She said in her statement that the information was accessed from 21 internet addresses, mostly belonging to postgraduate deaneries—mostly. We do not know precisely who they were. Does she know who all those 21 internet addresses belong to?
	The Secretary of State has said that there is no evidence that members of the public or commercial interests accessed the site. She may not have the evidence, but can she say that it is her certain knowledge that members of the public or commercial interests did not access the site? As it turned out, there was not only one, but two security breaches.
	The Secretary of State must have known about the problems, because of, for example, the following letter to her from the British Orthopaedic Trainees Association on 5 March:
	"We have also had concerns about the security of the site, with shortlisters reporting they could access deanery data and applications they had nothing to do with."
	She knew that there were problems with security on the site, and her Department did not take the necessary action to prevent that gross security breach.
	Will the Secretary of State explain why on the morning after the breach her Minister, Lord Hunt, went on to the "Today" programme, where, having being asked by Jim Naughtie why it had happened, he said:
	"Someone has apparently deliberately leaked that information"?
	Jim Naughtie asked:
	"You think it was deliberate rather than a mistake?"
	Lord Hunt replied:
	"It's quite clear it was leaked."
	What was the justification for the Department putting out that information to the public and junior doctors on the day after the breach occurred? If the Secretary of State cannot guarantee security—she has failed lamentably in this case—what possible guarantee can there be for the patient record data, which will be loaded on to the electronic patient record? We need much greater assurance.
	The Secretary of State went on to discuss what is happening now to junior doctors. She said that they are continuing to go through the process without further security or technical problems. I have received 14 examples of occasions when junior doctors have gone on to the site to try to book interviews. They have seen their preferences change; they have seen interviews being booked for two weeks prior to their application; they have seen double interviews; they have seen their eligibility disappear; and they have been told that there are no vacancies, but when they have telephoned, they have been told that there are choices. The system is not working. It is probably just as well that it has been suspended, because it needs to be suspended until we are satisfied about both security and the technical problems.
	How can the Secretary of State simply assume that the timetable will be met? According to the review group's plan, junior doctors should have started booking their interviews on Saturday and completed the process by this Thursday. We are four days into the process, and the site is still suspended. In theory, junior doctors have only 48 hours in which to book their interviews in order to maintain the timetable.
	We had a debate last week, from which there are still outstanding questions that the Secretary of State must answer. Her Department asked trusts across the country through strategic health authorities to provide applications for additional training posts, and the trusts were asked to send in those applications by 27 April, which was last Friday. How many applications has she received? What opportunity is there now for additional training posts to provide the flexibility for junior doctors to have greater confidence? Will she assure the House that flexibility will be given to Professor Sir John Tooke's group for next year by adding training posts this year and next year and by ensuring that wherever possible temporary, one-year training posts are appointed this year, rather than all the posts going on run-through training posts?
	Does the Secretary of State not understand that the lamentable shambles that has brought her to this House on, I think, four occasions—we have brought her here twice—has done untold damage to the confidence of the medical profession in the way in which its education and training is being managed. It is down to the profession to restore confidence, and I hope that Sir John Tooke and his colleagues will be able to do so.
	Frankly, the medical profession has lost confidence in the Secretary of State. Last Saturday, the British Medical Association junior doctors committee unanimously called on her to resign. I know that she will not walk, but the next Prime Minister ought to move her, and I hope that he does so. Does she not understand that there are two words that junior doctors across this country want to hear her say when she gets up and that those two words are, "I resign"?

Patricia Hewitt: The hon. Gentleman asked a series of questions; let me deal with them in turn. He asked about who exactly accessed the site after the first breach. As I indicated, our security investigators have established that access was made from 21 different addresses, the great majority of which belonged to postgraduate deaneries. I am confident, from that investigation, that no members of the public or other commercial organisations accessed the site. Those investigations are continuing, and as more information is established appropriate action will be taken.
	The hon. Gentleman referred to shortlisters having access to applications. It was part of the system designed at the request of the postgraduate deaneries that those assessing applications should be able to access the full range of applications because in some cases multiple assessments were being made.
	On the leak, we have still not been able to establish how "Channel 4 News" came to be told of the existence of these unprotected website pages. However, since the address of the website page for each of the postgraduate deans included a randomly allocated number, it seems highly unlikely that it was by accident. That is why my noble Friend Lord Hunt made the statement that he did on the morning following this outrageous security leak.
	The hon. Gentleman referred to the electronic patient record system. That is a completely separate system established under completely different security and governance arrangements and with a very well developed security compact with patients and the public. It is currently being trialled in various parts of the country, and so far patient response has been extremely good.
	The hon. Gentleman referred to junior doctor candidates changing their preference for applications. It is perfectly true that in a relatively small number of cases people were told inaccurately, or rather were told that there were no vacancies or that there were question marks about their eligibility. That did not come from the MTAS site but was a matter for the deaneries. It was not a fault in the MTAS site, nor did it have anything to do with security breaches; it was a matter for the deaneries, and it is being sorted out where necessary between the individual postgraduate deaneries and individual applicants.
	More than 40,000 interviews were arranged initially as part of round 1, and that part—now round 1A—has been completed. As I said, more than 15,000 new interviews are being made available in round 1B. Some of those appointments were sent to junior doctor applicants before the security breach and therefore the suspension of the site; others, of course, have not been confirmed because of the site's suspension. However, if the hon. Gentleman looks, for instance, at the London deaneries website, he will see that applicants have been informed through that site that interviews are planned to start on 8 May and that candidates will be contacted either through MTAS, when that is restored, or through other administrative arrangements if necessary.
	I can confirm to the House that, as I said last week, we are working with postgraduate deaneries and with the service to create new training posts that will help to meet the aspirations of junior doctors but will also meet the needs of the service. We will confirm the number and the specific specialties, where they will be available, as quickly as we can.

Kevin Barron: Can my right hon. Friend confirm that the leaks that took place on the site last week are nothing at all to do with the electronic patient records that run inside the national health service, and that the words of the Opposition Front-Bench spokesman are nothing more than irresponsible scaremongering from backwoodsmen?

Patricia Hewitt: My right hon. Friend makes his point with great force, and I entirely agree.

Norman Lamb: This is the fourth occasion on which we have debated this scandalous sequence of events.
	The Secretary of State sought to reassure us that the only web addresses that accessed information were at one of the country's main news organisations, which is not particularly reassuring. Even so, does she accept that the situation could have been far worse and that far more accesses could have been made in other circumstances? Will the right hon. Lady also concede that the information could have been passed on by those who accessed the site?
	The Secretary of State said that the overwhelming majority of internet addresses were at ITN, but that suggests that not all of them were there. Where were the others? Are they being investigated? What has been discovered so far?
	Will the right hon. Lady concede that the real outrage is that the matter could and should have been avoided through adequate piloting to identify exactly that sort of risk and if the Government had listened to all the warnings that were being given? Does she accept that she knew about IT glitches? The letter from the British Orthopaedic Trainees Association has already been mentioned. What action did she take when she received it to investigate the concerns?
	The website states:
	"Normal service—
	whatever that means—
	"will resume as soon as possible."
	When is it expected to resume? Methods Consulting runs MTAS. The Secretary of State referred to a breach of contract. What action is being considered about that? Could the actions—or inaction—of Methods Consulting or others amount to a criminal offence under data protection legislation? Will that be investigated? Will a thorough, independent investigation—not by a company that Methods Consulting brings in—take place into the causes of the security lapses and to ascertain whether other breaches, about which we do not know, occurred?
	How many individual medical graduates' confidential information was accessible? We know that only a few people accessed it, but how many people's confidential information was accessible to anyone who sought to find it? As we have heard, Remedy UK has received numerous details from junior doctors of strange glitches, such as preferences being changed without their knowledge.
	The hon. Member for South Cambridgeshire (Mr. Lansley) gave other examples, but an especially serious example was that of Dr. Hua Luk, a Surrey-born doctor and a British citizen who was told that his application had been rejected because he did not have the correct immigration status. That is a scandal. Does not that evidence show that the system is discredited?
	I have repeatedly questioned the Secretary of State about whether it is logistically possible to conduct all the extra interviews in the time scale provided. With the website down, what guidance is being given to applicants about arranging interviews? What faith should we have in NHS IT and the Government's plans for a national spine of patient data when such a debacle occurs?

Patricia Hewitt: I entirely agree with the hon. Member for North Norfolk (Norman Lamb): it was a serious, deplorable breach of security, as I have already said. It could have had far more serious consequences.
	The hon. Gentleman referred to those—one or more individuals—whom we know accessed personal information without authority. It is a matter for their employers—and possibly others—to establish whether the personal information that they accessed was made available to other people.
	The hon. Gentleman asked about the 21 addresses and establishing precisely who accessed information from each address. As I said, those investigations are continuing. He referred to piloting. I have no doubt that it is useful—indeed, we piloted the system for the re-preferencing exercise with the help of the BMA and academy junior doctors and it worked well. However, the security breach that occurred last Wednesday was simply due to a decision by an individual at the IT contractor. It was a case of human error, which I am afraid that piloting could not have predicted or prevented.
	The hon. Gentleman asked when the website would be restored. As I said in my statement, that will happen as soon as we are satisfied about security. He asked whether investigations are continuing, who by and whether criminal offences might have been committed. It is possible that criminal offences have been committed but we will not know that until the investigations have proceeded further.
	Perhaps I could stress to the hon. Gentleman that, as I said in my statement, in order to establish the enhanced level of security that I believe is now necessary—given the publicity that the site has attracted and the danger of further or additional attempts to hack into it—we have brought in the country's leading experts on the subject: the Communications Electronics Security Group in Cheltenham, which is part of the National Technical Authority for Information Assurance, will be quality assuring the security arrangements.
	The hon. Gentleman asked about the number of applicants for foundation programme posts whose personal details had been made available in this wholly improper manner to the postgraduate deaneries. The number of medical graduate applicants involved is just over 6,000. He referred specifically to the case of the Surrey-born doctor who was told that he was ineligible. It is not, however, the MTAS system that makes decisions about eligibility; it is the individual deaneries. I understand that that case was raised with the help desk—some others certainly were—during the re-preferencing exercise, and such cases were quite properly referred to the individual deaneries to sort out. If the hon. Gentleman gives me further details of that case, however, I will ensure that the deanery concerned sorts it out.
	We are keeping in close touch with the postgraduate deaneries on this issue, and at this stage we expect the additional 15,500 or so round 1 interviews to be completed by early June. As I have already said, information on the dates for those interviews is already being made available by the individual deans. Appointments will then be confirmed—or, where necessary, changed—either directly through MTAS, when it is restored, or through the deaneries' making other arrangements to contact the applicants concerned.

Gisela Stuart: I think that those on both sides of the House agree that this was an outrageous security breach. Given that we all rely on IT, and on having access to such websites, is it not incumbent on all agencies, when they come across such security breaches, to alert the authorities rather than to exploit the situation? Am I right in understanding that ITN and ""Channel 4 News"" knew about the breach for more than two hours? If so, was it not extraordinarily irresponsible of those broadcasters to exploit that situation rather than notifying the Department of Health so that it could deal with it?

Patricia Hewitt: My hon. Friend makes an important point. Of course, "Channel 4 News", having been informed of the breach, was entitled to report it. It was a serious security breach, and the programme was entitled to report it; indeed, it might well claim that it had a public responsibility to do so. I agree with my hon. Friend, however, that it also had a responsibility to notify us of that breach urgently—indeed, immediately—so that the proper action could be taken to ensure that people's personal confidential details were not accessed by others who had no right to access them.

Michael Penning: This recent debacle will have even more serious effects on family members and loved ones who are trying to get training posts. The BMA said this morning that 34,250 doctors were trying to find posts, but that only 18,500 posts were available. The BMA also said that the vast majority—two thirds—of those doctors will not stay in the NHS. This is a crazy situation. We need those doctors to stay in the NHS—they have been paid for by taxpayers' money—but under this Secretary of State's leadership, if we can call it that, there is massive distrust in the system.

Patricia Hewitt: I have already said that there is a real, and unsurprising, failure of confidence in the MTAS system, the computerised application system for recruitment. I am afraid, however, that once again Conservative Members are, deliberately or inadvertently, muddling up the numbers. There are 32,000 eligible candidates for training posts. There are 23,000 training posts—more than ever before. Of the applicants, about 30,000 are already working in the NHS. Some are in training posts, but thousands are in non-training junior doctor posts—staff posts, non-career consultant grade posts, and so on. All those jobs will continue to be needed in the NHS. It is therefore simply wrong to say that an applicant who does not get a training post, or does not get the training post that he or she wanted, will inevitably be unemployed.

David Taylor: Having spent three decades in large-scale public sector IT, I must say that I tend to agree with the chairman of the BMA, in his letter to the Secretary of State this morning, that the IT system concerned is relatively simple, and that technological failings would tend to remove the confidence of patients in the care system being developed. Will the Secretary of State indicate how she will reassure the wider general public? Will she bring in the Office of Government Commerce to consider the lamentable lapse by Methods Consulting, which seems to have been instrumental in this latest debacle?

Patricia Hewitt: I have already explained what we are doing about the two lapses that took place last week, and the failures of Methods—human failings rather than inbuilt system failings—which allowed that to happen. On the much broader issue of the electronic patient record, we have known from the beginning that it was essential to have the highest possible level of security before putting confidential medical details about NHS patients into an electronic system. It is well worth saying, however, that the current manual system is not exactly a model of security, and that regrettable breaches of privacy and confidentiality have been reported on various occasions over many years. Because of the concerns about electronic patient records, we have gone to considerable lengths over some years to put in place a carefully worked out patient record guarantee, and to discuss that with patient representative organisations, the BMA and many others in the medical profession. We are currently piloting the electronic patient record in a small number of places in the country, to establish that there is justified public confidence in the electronic patient record.

Peter Bottomley: Is the Secretary of State briefed on a daily basis on the material on the Mums4Medics and Remedy UK websites? Does she agree that the interest of the broadcast and print media has brought to public attention many of the issues from which junior doctors were suffering without the knowledge of the outside world? Will she try to clear up the eligibility issue? When I took it up with a deanery, I was told that the issue was nationally determined, whereas the Secretary of State said that it was determined by deaneries. It should not be possible for deaneries to have inconsistent views on eligibility, so will she have a clearing desk at the Department? Finally, will she give an answer on whether it is possible to apply for round 2 without having applied for round 1, given that many doctors are waiting for exam results and, on advice, withheld their applications at the beginning?

Patricia Hewitt: I do indeed keep up to date with the Remedy UK and other relevant websites. Various websites have raised concerns, particularly about last Wednesday's security lapse, suggesting, for instance, that people's future credit rating might be compromised. That is why I have taken pains not only to establish the facts and to deal with the security breach, but to put the information that we have so far been able to establish directly into the public domain.
	On the issue of eligibility, there is one set of rules about eligibility in relation to immigration status, and there are specific eligibility criteria that relate to different posts, at different levels of seniority, in different specialties. In both cases, the postgraduate deaneries check whether individual candidates are eligible, in relation to their immigration status and their educational qualifications and experience, for the jobs for which they have applied. As for round 2, the review group is considering that at the moment, and I shall make a further statement in due course.

Sarah McCarthy-Fry: Obviously my right hon. Friend cannot say exactly when the website will reopen, because of the rigorous checks that will be required, but can she reassure us that the delays will not jeopardise junior doctors' training?

Patricia Hewitt: That is an important point. Had it not been for the publicity and the heightened risk of people hacking into the site, the initial investigation by MWR InfoSecurity would have provided enough reassurance to enable us to reopen it; but because of that heightened sensitivity and the need to restore junior doctors' confidence in the system, we decided to take a little longer, and to involve the national technical professions as I described. That will ensure that, without creating any unnecessary delays, we can give people the security assurance to which they are entitled and which I certainly intend to obtain.

Andrew MacKay: Will this arrogant Secretary of State for once simply say sorry, instead of blaming "Channel 4 News" and ITN for the shambles?

Patricia Hewitt: I have already apologised to junior doctors for the additional anxiety and worries created by last week's episode.

Meg Hillier: This breach is extremely unfortunate, and a number of my constituents have written to me expressing their concerns—but what concerns them most is progress. My right hon. Friend told my hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry) that it would take "a little longer" to get the site up and running. Can she be more specific? In my constituency and nationwide, junior doctors are keen to get on with it.

Patricia Hewitt: I know my hon. Friend will understand that I cannot say this afternoon exactly when we will be able to reopen the website, but I stress to her constituents and others that if it takes longer to establish the necessary level of security and assurance, I believe that that is worth while. The individual postgraduate deaneries have already said that if necessary they will make other administrative arrangements to contact junior doctors, confirm their interview dates and go ahead with the 15,500 additional interviews that have been made available as a direct result of the work of Professor Neil Douglas and his review group.

Mr. Deputy Speaker: I think I owe it to the  Hansard reporters to ask the Secretary of State to direct her remarks to the microphone. If she does not, it makes things very difficult for them.

Peter Viggers: Wading valiantly through this continuing disaster are more than 30,000 junior hospital doctors. When I asked the Secretary of State to give regular progress reports last week, I did not expect her to be back this week explaining that the situation had worsened. Will she ensure that when the Department thinks it has put the situation back on the rails, she—or perhaps her successor—can come to the House and reassure us that enough training posts will be available for the commitment and dedication of junior hospital doctors not to be lost?

Patricia Hewitt: I do not think that either of us expected to be dealing with this subject again quite so soon, but I stress again that already more training posts are available than have been available in the NHS before—the 23,000 to which I referred last week—and that in addition we will have new training posts. They are currently being established between the postgraduate deans and the service, and will be validated by PMETB—the Postgraduate Medical Education and Training Board—because that is a requirement for training posts. Moreover, we will still have the staff posts, the non-consultant grade career posts, that already exist in the service. Thousands of applicants for training posts are currently employed in those posts, and will continue to be employed in them if their applications are not successful.

Diana Johnson: Can my right hon. Friend reassure me that she believes that to date there has been no criminal activity as a result of the website problem?

Patricia Hewitt: I cannot assure my hon. Friend that there has been no criminal activity. There may have been, but we do not know yet. Investigations are continuing, and if there is evidence of criminal activity it will of course be reported to the proper authorities.

Stewart Hosie: For many years I was involved in IT systems development, including writing a security system to protect online records, which was used by the NHS. The Secretary of State described the second breach in the following terms: "applicants...could randomly access another candidate's messages on the messaging facility...by varying the digits of their own message reference"—without, it appears, requiring a different password related to that different message reference. I am wholly shocked. Who agreed the security testing plan? Who signed it off? Who agreed, approved and signed off the outcome of the security testing plan for MTAS? Will she agree to place in the Library the full technical details of the security plan and its outcome, so that those in the know can have a look at those things to determine whether the Department signed off and approved something that may not have been wholly appropriate?

Patricia Hewitt: On the first point, to access the MTAS website any junior doctor applicant has, of course, to enter his unique identifier and user password, but the hon. Gentleman is right that it appears—this is what I have been informed—that an applicant who was already legitimately on the site could access part, not all, of other candidates' messages without going through a further password approval. Again, further investigations are going on into that point, but the security breach is being remedied and will be tested and assured before the website, and that messaging facility, are restored.
	Procurement, the security specifications and so on were a matter for the Department, but also for the programme management board. I have asked the Office of Government Commerce to look at the details of that procurement, so that we can learn any necessary lessons—although I stress that Methods was already an approved Government contractor. The hon. Gentleman asked me to put into the Library the full technical details of the security systems on the site. I do not propose to do so, because although that might be helpful to him, it might also be helpful to others possibly less well disposed than he.

Rob Marris: I welcome the Secretary of State's continued openness and helpfulness on this matter. On 16 April, before the last two security breaches, I asked during the statement whether anyone had been disciplined for the problems that were then apparent, and she told me that
	"no disciplinary or performance management steps are being taken in the Department".—[ Official Report, 16 April 2007; Vol. 459, c. 48.]
	I now understand from her statement today that "appropriate steps are...being taken." She also said in her statement that this was "an extremely serious breach of security, as well as a breach of contract between the IT provider"—Methods—"and the Department of Health." Can she tell me whether Methods has had its contract terminated over those two security breaches, and if not, why not?

Patricia Hewitt: No, we have not terminated the contract with Methods. It is responsible for the MTAS site. Our first priority is to deal with the security breaches, and to get proper, full independent assurance that the security breaches have been remedied and that there is an adequate full level of security on the site before it is restored. Our priority is to ensure that the junior doctors can complete the first round of interviews. The job offers can then be made and we can then move on to round 2. Clearly, it would be helpful to have the MTAS system back up and running, with proper security and greater confidence in it, in order to complete the interviews.

Desmond Swayne: The Secretary of State said in her statement that she would be reporting this situation to the chairmen of Channel 4 and ITN. Can she possibly imagine that they are unaware of it?

Patricia Hewitt: Until my statement this afternoon, I have no idea whether the chairmen of ITN and Channel 4 News were aware of the details of what has happened, the length of time that elapsed between their beginning to access the site and actually telling us about it, or the extent of the access that was available to them. What they do with the information is entirely a matter for them, but I do intend to draw it to their attention.

David Drew: Will my right hon. Friend confirm that both the BMA and the royal colleges are still in favour of reforming the system of appointment to training posts? If not, when did they change their minds? It would be helpful if there was at least some consistency from the medical profession.

Patricia Hewitt: The BMA and the Academy of Medical Royal Colleges have been involved for many years in the review of medical training that has led to the decision to create modernising medical careers, as they were also involved in the successful establishment of the foundation programme two years ago. They remain closely involved, in particular through Professor Douglas' review group, in helping to ensure that we overcome the serious difficulties that have arisen with the MTAS system. Those difficulties do not call into question the underlying principles of modernising medical careers or the substance of the new training programme, which remains widely supported. The problems have arisen, in the first year of transition to the new specialty training posts, with the system for application, shortlisting and interviewing. We are in the process of working through that, and I am grateful to the BMA and the academy for continuing to help us ensure that as quickly as possible we get junior doctors properly interviewed and job offers made—and that we do that in a way that is absolutely fair to junior doctors and meets the needs of the service and, above all, of patients.

Several hon. Members: rose —

Mr. Deputy Speaker: Order. If I am to call all Members who still wish to ask a question of the Secretary of State, I must ask for single questions and brief answers.

Julian Brazier: The Secretary of State said that she hoped that interviews would be finished by early June. May I remind her of the case of my constituent about whom I have corresponded extensively with her Department? He is currently serving as a junior doctor in Afghanistan with the Territorial Army, and he has now had to fly back from there to have his interview. Given the very large increase in TA medical presence projected for next year, I urge the Secretary of State in reviewing the system to ensure that this category of junior doctor, small as it is, does not get disadvantaged again.

Patricia Hewitt: Of course we will try to ensure that.

Julian Lewis: Why do junior doctors have to declare their sexual orientation in making their applications in this competition, and will the Secretary of State give a categorical assurance that any junior doctor who declines to do so, in the light of the monumental mess that has recently arisen, will not be discriminated against in the intense competition for these posts?

Patricia Hewitt: That is equal opportunities information, obtained simply for the purposes of monitoring. It is fairly standard nowadays. That information does not form part of the decision on whether a job offer should be made to someone, and of course, people are not penalised if they do not supply it.

Justine Greening: Was it ever requested that the data upload on to the MTAS website be password protected? Was Methods ever asked that? If it was not, why did the Secretary of State not take a closer interest, given that the website has been a shambles from start to finish, and given the order in which events arose and decisions were taken?

Patricia Hewitt: The issue was simply that the postgraduate deaneries needed the information, and it would have to be supplied from MTAS. The decision to upload the data in the way in which it was done was made, improperly, by an individual at Methods. We could do nothing about that until we learned about it.

Tony Baldry: Is not the reality that on the 10th anniversary of Labour coming into office, suitably qualified junior doctors do not have training posts and hospitals are at risk of losing services? If the Secretary of State thinks that that is wrong, please can she explain to my constituents why for the first time in almost half a century the Horton general hospital in my constituency is at risk of losing 24/7 children's services and consultant-led obstetric services because—we are told, among other reasons—there are insufficient junior doctors? What happened to "24 hours to save the NHS"?

Patricia Hewitt: In the last 10 years under this Labour Government we have ensured—against opposition from the Conservative party—that the NHS has more than 30,000 more doctors, more than 80,000 more nurses and about 280,000 more employees in total. I well remember what was happening 10 years ago, when our constituents, and those of the hon. Gentleman, were waiting 18 months, or two years or more, for a desperately needed hip replacement operation, and when cardiac death rates were among the highest in Europe. Patients know very well just how bad things were under the Conservatives, and how much better they are now—how much better and faster they are being cared for as a result of the policies of this Labour Government.

Young Offenders (Provision of Speech Therapy)

John Bercow: I beg to move,
	That leave be given to bring in a Bill to require the provision of speech and language therapy for young offenders; and for connected purposes.
	In preparing today's Bill, I have been indebted to Juliet Lyon and Jenny Talbot of the Prison Reform Trust, and to Kamini Gadhok and Jane Mackenzie of the Royal College of Speech and Language Therapists. The problem is simply stated: more than 60 per cent. of the 11,000-plus young offenders in institutions today lack the communication skills to engage effectively and profitably with educational programmes, with courses in behaviour and anger management, and with initiatives designed to enhance their thinking skills.
	The House will be aware, not least from the work of the educational charity I CAN, that it is estimated that the lifetime cost of the failure to treat communication disorders is of the magnitude of £26 billion. We are also commonly reminded that some 80 per cent. of young offenders reoffend: they go through the revolving door of the criminal justice system over and over again. We also know from a vast literature of published evidence of repute and academic expertise that a lack of education and the inability to communicate are risk factors in reoffending. People in the situation that I have just described are less likely to obtain a qualification, less likely to land a job and less likely to find a home; conversely, they are more likely to suffer emotional and behavioural problems, more likely to experience mental health challenges, and more likely to commit, or to go on to recommit, crime.
	That is the situation with which this country is faced, and it prompts the obvious question: what can be done about it? I put it to the House that we could do a lot worse in dealing with this client group of people with severe communication disorders than to go for a significant, far-reaching and intensive programme of speech and language therapy.
	As chief inspector of prisons, the then Sir David Ramsbotham—now Lord Ramsbotham—visited Polmont young offenders institution in Scotland. There, he had an intriguing and memorable conversation with the governor of the institution. Going round the prison estate, he was struck by the governor's observation that if by some mischance he was obliged to get rid of all the institution's staff, and if it was within his discretion, the last person to be let out of the gates would be his speech and language therapist, because of the invaluable extra that that person provided for the institution and the young people incarcerated there.
	Sir David subsequently became aware, as others will have done, of the work undertaken on commission for the Home Office by the Learning and Skills Research Centre as long ago as 2001-02. A study of a particular group of young offenders in an institution found that when that group were given help with their oral communication skills, they were 50 per cent. less likely to reoffend in the year after release than the group who were not so helped. The reoffending rate was cut from a typical rate of 44 per cent. to 21 per cent. Armed with the impressionistic material and the empirical evidence, the chief inspector of prisons said to the Home Office, "I think that this is significant. I have taken advice and I am told that the most distinguished speech therapist in England is Professor Karen Bryan. I would like to undertake a two-year trial at particular institutions, to see whether help could effectively and cost-effectively be provided."
	It was agreed that the trial would go ahead, and it took place under the auspices of Professor Karen Bryan between 2003 and 2005. Speech therapists were appointed at Brinsford and Werrington young offenders institutions, both of which are in Staffordshire. Working to Professor Karen Bryan, their responsibility was to assess, to diagnose and to plan effective interventions to help those young people. The young offenders suffered from a miscellany of difficulties, but the significant point is that they suffered from difficulties of hearing, of listening, of understanding, of remembering, of relating to people and of expressing themselves in terms that were simultaneously comprehensible and legitimate.
	At the end of the two-year study, which was privately financed courtesy of Lady Helen Hamlyn, Professor Bryan concluded that 100 per cent. of the young offenders studied would benefit from, or—to put it more strongly—were palpably in need of speech and language therapy. The report went to the Government. What did Ministers say? They were full of plaudits. The response was laudatory. They were grateful for a striking, important and valuable piece of work. One could deduce from Ministers' observations that the report would have a significant influence on future Government policy. Therefore, I am bound to inquire what, two years on and in the light of those public ministerial utterances, has happened. The answer is: absolutely nothing.
	To add insult to injury, in December 2005 the Department for Education and Skills published a document entitled "Reducing Re-offending Through Skills and Employment", which consisted of 47 pages, 20,000 words and no fewer than 58 footnotes, but made not one reference to speech and language therapy. In the House of Lords on 27 October, Baroness Scotland of Asthal said that there was no problem, because the service was "already available". If people were identified as having a problem, they were referred. The unspoken message that we were entitled to take from those remarks was that if there was a problem, it was being handled and there was no reason to worry. That is cold comfort, and rings hollow to the people at the coal face who know that it simply is not the case. The impression was given that it was happening, but it is not; that people can get the help, when they cannot; and that the system will work, when it will not.
	There is an institutional paralysis at the heart of the system, not noticed by the Under-Secretary of State for the Home Department, the hon. Member for Bradford, South (Mr. Sutcliffe) in dealing with the Offender Management Bill—and it is the fact that the Home Office, the Department of Health, the Department for Education and Skills, the Youth Justice Board, the Prison Service and children's services are all involved. When everyone is responsible, no one is responsible. Nothing happens, nothing changes and nothing beneficial accrues.
	The proposal in the Bill is simple. I suggest that we should cut the Gordian knot and place responsibility firmly in the hands of the Home Office. It provides that every young offenders institution—all 18 of those that cater for young men and the four that cater for young women—should be required to employ a speech and language therapist. That person would screen, diagnose and provide. The cost, at £34,000 per therapist, is infinitesimally small compared with £30 million spent on the respect agenda, or the £80,000 per head cost of uselessly and unproductively incarcerating someone who, we can confidently predict, left untreated, unqualified, unreformed and unemployed, will come back into a young offenders institution all over again.
	I understand the strength of public feeling that says that when people commit serious crimes they must be locked up and pay their dues. The deprivation of liberty must take place. But we have to give people hope. We have to do something to make a difference. My Bill is not a panacea, but it would improve lives, offer opportunities and do something to hold out the prospect that those young people who are on the wrong track can become productive, effective and worthwhile citizens. I am proud of my Bill, which enjoys cross-party support, and I commend it with enthusiasm to the House.
	 Question put and agreed to.
	Bill ordered to be brought in by John Bercow, Mr. Kevin Barron, Mr. Richard Benyon, Angela Browning, Mr. Tom Clarke, Mr. Geoffrey Cox, Mrs. Joan Humble, Mr. Ian Liddell-Grainger, Bob Russell, Mr. Ben Wallace, Hywel Williams, Sir George Young and Mr. Geoffrey Cox.

Young Offenders (Provision of Speech Therapy)

Mr. John Bercow accordingly presented a Bill to require the provision of speech and language therapy for young offenders: and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 15 June, and to be printed [Bill 98].

Peter Bottomley: On a point of order, Mr. Deputy Speaker. During the exchanges on the modernising medical careers statement, the Secretary of State said that she was going to get in touch with the chairmen of ITN and Channel 4 because of the time taken to get in contact with the Department. One of the rules of Parliament is to maintain an open society, with the media able to investigate and report. Has there been a change of policy that requires Secretaries of State to comment on the actions of the media, instead of the other way around?

Mr. Deputy Speaker: I have listened to the hon. Gentleman's point of order, but he will know that it is not anything about which I can comment from the Chair. His observation is more of a continuation of the earlier exchanges.

Orders of the Day

Finance Bill
	 — 
	[2nd allotted day]

(Clauses Nos. 1, 3, 7, 8, 12, 20, 21, 25, 67 and 81 to 84, Schedules Nos. 1, 18, 22 and 23, and new Clauses relating to microgeneration)
	 Considered in Committee [Progress, 30 April .]

[Sir Alan Haselhurst  in the Chair]

Clause 67
	 — 
	Abolition of contributions relief for life assurance premium contributions

Edward Balls: I beg to move, That the clause stand part of the Bill.

Alan Haselhurst: It may be for the convenience of the Committee if I say that it will be in order to refer to schedule 18 in the course of the debate. I would then expect the amendments to the schedule to be taken in short order, and similarly the formal question on schedule 18 being the schedule to the Bill.

Edward Balls: Thank you for your guidance, Sir Alan. It is a great pleasure and honour for me to serve for the first time under your chairmanship in a Committee of the whole House.
	Clause 67 relates to changes to the relief available to individuals for their pension contributions that are used to fund personal term assurance policies, and it also introduces schedule 18 of the Bill. In summary, clause 67 and schedule 18 are a response to a process of consultation with industry, announced at the time of the pre-Budget report, on the application of tax relief to personal term assurance. Throughout that process, and indeed throughout the whole consultation period when developing the new pensions tax regime in the period up to A-day on 6 April 2006, the Government have consistently applied the PBR's principles for providing tax relief—namely that such relief should support saving for an income in retirement.
	Indeed, the Government stated in the 2002 consultation document issued before A-day that
	"to encourage people to save in a pension, the Government awards favourable tax treatment...which people must use to provide a secure income in retirement. Most of the savings built up in this way must be used to generate a taxable income in retirement."
	The tax reforms that came into effect last April removed the complexity that had led over many years to different tax rules applying across numerous types of pension scheme. The long-term benefit is a streamlined regime that is easier to understand and cheaper to administer and which was at the time, as it is now, broadly welcomed by the pensions and savings industry.
	As we announced at the time of the pre-Budget report, we became aware in the summer and autumn of last year that the rapid growth of pension term assurance—a life insurance death benefit that in most cases was providing no income in retirement—was leading to rising costs and was clearly at odds with the principles we had set out. To deal with the problem, we announced in the pre-Budget report that we would work with the pensions industry to explore, in time for the Budget, how our principle that pensions should be tax-advantaged to provide an income in retirement could be applied to pension term assurance contracts. We announced that any changes we decided to make would not affect either personal arrangements entered into before 6 December 2006 or existing types of employer arrangements.
	Following detailed discussions with industry representative bodies, such as the Association of British Insurers, it became clear that a meaningful link could not be provided between those policies and pension saving without making the products commercially unviable or leading to high compliance and tax costs to Her Majesty's Revenue and Customs and the Treasury. That is why the Budget announced the changes before us today.
	In making the changes, we have worked with the industry to protect the position of consumers who had taken out policies before the pre-Budget report announcement in 2006 and, as I will set out in more detail later—either in the debate on the amendments or in the wind-up—we have tabled amendments to the transitional arrangements in schedule 18 to ensure that they work in the best interests of the consumer. On that basis, given the amendments we shall propose to the schedule, I commend the clause to the Committee.

Mark Hoban: As the Economic Secretary indicated, clause 67 abolishes pension term assurance, which was introduced in its current form in the Finance Act 2004 and was part of last year's A-day reforms to introduce pensions simplification. This is the third major pensions U-turn since the 2004 Act; it follows hard on the heels of taking residential property out of self-invested personal pensions and the changes to alternatively secured pensions foreshadowed last summer.
	I am concerned about the implications of the abolition of pension term insurance and I have four key questions. First, should not the attractions of pension term assurance have been apparent to the Treasury at the outset? Secondly, how has the Government's thinking evolved over the past few years? The Economic Secretary gave us a flavour of that, to show that it had remained constant, but I contend that the Treasury's thinking has changed since the 2004 Act. Thirdly, how did the industry respond to the Government's concerns? Finally, what are the consequences both for the pensions life insurance industry and for consumers?
	First, however, I shall consider why pension term assurance was introduced in the Finance Act 2004. Members on both sides of the House are lucky. As part of our pension scheme we receive a death in service benefit. When we die our widow or widower will receive a lump sum, on top of their pension. Our contribution to that benefit is tax-free. If I die as a Member of the House—

Rob Marris: Shame.

Mark Hoban: It is not something I am anticipating but if, unfortunately, I died while I was a Member my wife would receive a lump sum, which she could use to pay off our mortgage, thus freeing up income. Alternatively, she could invest the lump sum to provide an income.
	A substitution effect arises from the death-in-service benefit. The lump sum can be invested either to generate an income or to pay off a mortgage to increase disposable income. The importance of that point will be apparent when I discuss the evolution of the Government's thought process a little later in my remarks.
	I am very fortunate as a Member to have that benefit, but others are not so fortunate. People who are self-employed, for example, will not have the same benefit and will have to pay for it themselves. Prior to A-day, this type of cover could have been subject to tax relief as part of a pension policy. Now, however, as we shall see later, even that is not available to the self-employed. Anyone not covered by an employer's scheme will have to bear the full cost of cover—something that we do not have to do. In fact, we are doubly lucky because in a sense the cost of the benefit is split between us and our employer. Someone who is self-employed will not only have to pay the full cost of a stand-alone policy, but will not receive any tax relief either. That raises real questions about the affordability of protection cover for many people on low or moderate incomes.
	The change that the Government have introduced creates some ironies. We will recollect that yesterday we discussed the incentives for incorporation in respect of small traders. As  Taxation recently noted, if the policy is paid for by the employer, it is acceptable. That leads to the ridiculous situation whereby someone operating through a personal service company can get tax relief, but a sole trader or partner cannot. Yesterday, the Government tried to reduce the incentive for incorporation, but this afternoon we are discussing changes that have encouraged it.
	When pension term insurance was introduced, the perspective from the industry was that it would lead to the closure of the protection gap. People out there on low and moderate incomes feel, as I said earlier, that they cannot afford life cover to provide for their dependants in the event of their death. It is worth reflecting on a recent article in  Money Marketing by Vanessa Owen of Liverpool Victoria. I am afraid that I am going to refer back to it regularly throughout my remarks, because it provides an insightful view of the development of opinion in the industry about the introduction and development of this product and its subsequent abolition. She said:
	"Everyone, including consumer bodies and the Government, understands that most people do not have enough life protection to cover sudden death of the main breadwinner or family carer. It is in all our interests to encourage more people to provide for their dependants and reduce dependency on the state. Despite all the talk about the size of protection gaps, since Swiss Re published its data, the problem has got bigger, with everyone scratching our heads over how to solve it. Then came pension term assurance."

Edward Balls: I want to understand the principles guiding the hon. Gentleman's approach. In 1984, tax relief on life assurance products was abolished by the Government of the day. Is the hon. Gentleman suggesting that we should revisit that principle and that tax relief on life assurance and term assurance products should be reintroduced? Should we reverse the 1984 decision?

Mark Hoban: It is interesting that the Minister raises that point, because the Government effectively reintroduced the relief in their A-day reforms for pension term assurance and they are now seeking to abolish it. What I aim to achieve this afternoon is to understand rather more about the Government's thinking on that matter, particularly why they felt it appropriate to introduce this tax relief in 2004, when they want to remove it 2007. That is the purpose of my remarks today.
	What the introduction of pension term assurance enabled in the 2004 Finance Bill was the creation of a level playing field, so that the indirect tax relief that we receive through our contributions to pension schemes, which gives us death-in-service benefits, is also available to others who are in a less fortunate position than us. It is worth reflecting on the debate that took place on the 2004 Finance Bill. The right hon. Member for Bolton, West (Ruth Kelly), who was then Financial Secretary to the Treasury, said in the Standing Committee debate:
	"Simplification will introduce greater individual choice and flexibility."
	She continued—this is the key quote—by saying:
	"For the first time, everyone will have the same opportunity to make tax-relieved pension savings over a lifetime."—[ Official Report, Standing Committee A, 8 June 2004; c. 427.]
	She referred to the creation of a level playing field.

Stephen Hesford: rose—

Edward Balls: rose—

Mark Hoban: I will happily give way to the hon. Member for Wirral, West (Stephen Hesford) who pre-empted the Economic Secretary by a second. I am sure that the Economic Secretary will remember that in future.

Stephen Hesford: I am obliged to the hon. Gentleman for giving way—I think. Does he not accept that, by and large, as I understand it, the financial press did not really bat an eyelid about this measure? The only point that the financial press seemed to make was about the timings and implementation. That is why the Government have tabled the various amendments to schedule 18. Given that there was not really the clamour that he appears to be trying to make out that there was and given that the Government have tabled amendments Nos. 6, 7, 8 and 9 to schedule 18, does he not agree that those amendments are the best way forward and will he support them?

Mark Hoban: I will not discuss the amendments at this point. I think that you indicated in your opening remarks, Sir Alan, that we may have a brief debate. We will support the amendments, because they help the Government to get out of a bit of a hole that they have created of their own volition. The Government dealt poorly with the transitional arrangements and there was a lack of clarity about the original statement that was made at the time of the pre-Budget report. That led to some concern and confusion about whether there would be relief for pension term assurance that was included within a pension policy and whether that tax relief would still continue. We have clarity now, whereas we did not have it in December. So, we will support the amendments.
	I am a little perplexed by the hon. Gentleman's remarks about the lack of concern in the financial press, because my reading of that press—particularly at the time of the pre-Budget report—was that there was a significant degree of concern among members of the industry. Certainly in conversations that I had in the aftermath of the pre-Budget report, there was quite significant concern, particularly given that so many industry members—I will come on to this later—had invested a significant sum in preparation for the launch of the policy. They are now left trying to administer a relatively small number of policyholders.

Edward Balls: To go back to the question of principle—it is important that we establish the principles that are guiding us in these debates—the hon. Gentleman quoted one of my predecessors, a former Financial Secretary, talking about tax relief for pensions. But term assurance is about not pension income but death benefit. It is a life insurance product. Does he accept that it was never our intention to tax-relieve non-pension savings in the manner that has transpired, or is he saying that introducing a tax relief for term assurance is his proposal to close the contributions gap—as he referred to it?

Mark Hoban: That is slightly curious. If it was not the Government's intention to introduce tax relief for pension term assurance, why on earth did they include it in the Finance Act 2004? The Government put the measure forward three years ago, in that Finance Act, but are now seeking to reverse it. If it was not their intention to have that provision, why did they include it in the first place? That is the problem that the Economic Secretary has to think about. The reality is that the measure was well understood by the industry. Perhaps the Economic Secretary will tell us why the Government included the provision in the Finance Act 2004, because the Committee would be interested to hear that. I would happily give way to enable him to give that explanation.  [ Interruption. ] The Economic Secretary says that he will give an explanation in his speech. Well, we have heard that before.
	If we go back to the Committee  Hansard for the 2004 Finance Bill, it is interesting to note that there was no discussion whatsoever on the introduction of pension term assurance. According to my reading of  Hansard, that clause seemed to pass through without comment. The then Financial Secretary to the Treasury did not give the merest warning that abuse could lead to the scheme being closed down; that is in stark contrast to the warning that she gave about alternatively secured pensions.
	The Government introduced the tax relief back in 2004, and when one talks to people involved in the industry, one finds that their view is that the Government should have been aware of the impact of the relief on the life assurance market. As the Association of British Insurers said:
	"Even before this change was made, the insurance industry told the government of the positive effect this could have on the term assurance market."
	It was an opportunity for that market to rejuvenate itself. That should have come as no surprise to the Treasury. Indeed, some people were so concerned that the change would lead to a large-scale re-broking of business that they started to lobby the Treasury. I once again point out what Vanessa Owen of Liverpool Victoria said:
	"When I first read the proposed death benefit rules back in 2004, I wondered if boards of directors across the country would be turning pale at the risk of churning to in-force books. But after much lobbying, it became clear the rules were not going to change before A-day".
	There appears to have been plenty of discussion and debate before A-day, and what happened should have come as no surprise. Indeed, when I spoke to a group of industry experts in January this year, I specifically asked them whether the take-up of pension term assurance should have come as a surprise to the Treasury, and they emphatically said no; the Treasury should have been aware of the scale of interest.
	The effect of the A-day change was to encourage people to think again about life assurance, as they could pay their premiums net of the basic rate of tax, if they were basic rate taxpayers, or net of the higher rate of tax, if they were higher rate taxpayers. When consumers went to see their financial adviser or someone at the bank, the person giving them financial advice would have been remiss if they had failed to point out that they could take out pension term assurance at a lower cost than normal life assurance, because of the generous tax relief introduced by the Government in their Finance Act 2004. It is worth considering one insurer and the rates that it was offering. According to an article in  The Times, a male non-smoker buying £300,000 of level-term cover from Legal & General would pay £27.25 a month in cover. If he chose pension term assurance, he would pay £25.25 a month in cover if he was a basic rate taxpayer, but if he was a higher rate taxpayer, he would pay only £19.39. I suspect that the hon. Member for Wolverhampton, South-West (Rob Marris) is thinking about the difference between £27.25 and £25.25 and saying to himself, "That does not sound like the basic rate reduction," and indeed it is not. There is recognition in the industry that the cost of pension term assurance cover was higher than the cost of basic cover, if we exclude tax relief.
	There were significant caveats about pension term assurance cover. As Richard Eagling, the editor of  Investment, Life & Pensions Moneyfacts says:
	"Although price is not the only differentiating factor to be considered when choosing between the two, the cost savings cannot be ignored, and for those clients who have no existing cover in place, the case for PTA is compelling."
	Consumers were warned that the policy might not be for them, as an article in  The Sunday Telegraph said:
	"For a start, only basic life insurance is available with these PTA packages. The tax-breaks do not apply to extras that are often added on to conventional term assurance products, such as critical illness cover which pays out if you suffer a serious illness that leaves you unable to work. Family income benefit is not covered either—this product pays out an annual income on death rather than a lump sum."
	So there were caveats in respect of the sale of such policies; it was not a straightforward slam dunk, as it were, to sell the policy to clients. There was a proper process that had to be gone through. Certainly, the increased affordability of term assurance would enable people who had previously found life cover prohibitive to take greater personal responsibility for their family, but as I said earlier, it also gave those with existing life cover the chance to see whether their cover could be re-broked.
	Again, Vanessa Owen made some perceptive comments about what happened in the industry at the time. She said:
	"What we did find was that, although not a storm, life protection volumes started to pick up from all channels. Consumers were interested in the tax relief message which was clearly stimulating demand although, judging by our average premium levels, it was not wealthier clients who were buying but people on more modest means.
	In other words, it was not just the wealthy who were taking advantage of another opportunity to claw back higher-rate tax relief but also regular policyholders looking to take out life cover at a competitive rate."
	What about churning—the re-broking of in-force life protection? Vanessa Owen said of the in-force life protection book:
	"It has remained largely intact, with rebroking activity at a minimal level",
	so it appears from her evidence that people on low and moderate incomes were taking the opportunity to put in place cover that they may have considered too expensive before.
	The interest in pension term assurance should have been apparent at the time. It certainly seemed to attract new customers. Has the Minister asked his officials to conduct any research into who purchased the products, and did the research that the Government conducted reflect Miss Owen's perception of the change of business in the market?
	If so many businesses were thinking of taking advantage of the introduction of pension term assurance—clearly, the Liverpool Victoria thought about it—why was that not obvious to the Treasury? Plenty of people seem to have told the Treasury. Why did not the Treasury realise sooner what the take-up rate would be, or was it so naive that it did not think it would happen after all, or so incompetent that it did not think of taking action prior to A-day?
	It is worth noting the cost of the Government's failure to take action. According to the regulatory impact assessment, the estimate of lost tax revenues if the clause is not reversed would be £160 million, out of a total estimated cost of £250 million for A-day reforms. What was the Government's original estimate of the amount of tax relief that would be claimed as a consequence of introducing pension term assurance? Presumably, in their calculation of the £250 million, they would have produced an estimate back in 2003-04. It would be interesting to understand the difference, from the Minister's perspective, between the original estimate and the current revised estimate, as set out in the regulatory impact assessment. If the Minister knows, I should be grateful if he enlightened me and the Committee about the difference between the estimate at the time that the A-day reforms were consulted on and the £160 million cost referred to in the regulatory impact assessment.

Edward Balls: I fear that the hon. Gentleman is in danger of misleading the Committee. The regulatory impact assessment refers to the cost that would arise to the Exchequer, had we not taken action at the time of the pre-Budget report. As I said, it was never the Government's intention to incentivise through pensions tax relief what became a rapid switch to pension term assurance. It was to prevent that cost from arising that we acted. I am still trying to work out whether the hon. Gentleman is supporting our action to protect the revenue base, or advocating a reversal of the 1984 decision not to tax advantage life assurance. On that question of principle, he still has not given us any clue.

Mark Hoban: I am only up to page 6, so there is plenty of time before we discuss that.
	I hope I did not inadvertently mislead the Committee. I am clear that £160 million is the Government's estimate of what the costs would have been in the future. It would be interesting to know what they think the cost is now and what they thought the cost might have been.  [Interruption.] The Economic Secretary says from a sedentary position that the cost at present is none, but we have had nine months of sales of the products. In a parliamentary answer, he told me the number of sales in the quarter to June and the quarter to September, so there would be some indication of the cost to the Exchequer. I am keen to understand what the Government's estimate of cost was at the time that they conducted their pre-A day consultation. The Minister still has not responded to that question. I happily give way to him.

Edward Balls: The estimate would have been that it was a negligible cost, because it was not the Government's intention to tax-advantage term assurance. The hon. Gentleman is not answering the question whether, as a matter of principle, he supports the extension of tax relief to life insurance and term assurance products to close what he has called "the coverage gap". Until he answers that question, it is hard for the Committee to understand whether he supports or opposes our proposals. At the moment, he is just drifting in the middle.

Mark Hoban: In my political career, I have never been accused of drifting in the middle on anything.

Philip Dunne: My hon. Friend is ploughing a steadfast course through the middle of the Economic Secretary's argument, and he is right to press the Economic Secretary. I struggled through the Red Book in an attempt to find an estimate of the current cost of relief to the Treasury, but I could not find anything. The Economic Secretary tells us that the amount was negligible in the past, which suggests that the Treasury had no idea not only what the relief would amount to, but that it was allowing it in the first place—he has just told us that it was unintentional relief. My hon. Friend is doing a noble thing in getting to the bottom of the matter.

The Chairman: Order. The hon. Gentleman is making a very long intervention.

Mark Hoban: It is remarkable that the Government introduced a change that happened to slip unintentionally through the legislative process and past the eagle eyes of the Treasury and Her Majesty's Revenue and Customs and that it will cost nothing. That does not stack up. I cannot understand whether the Treasury was naive or incompetent when it introduced the measure and failed to understand the ramifications. My hon. Friends are encouraging me to believe that it was both naive and incompetent—I am a generous man, and one or the other is enough for me.
	The Economic Secretary has raised the question of the future cost of the policy. I assume that the £160 million figure is an annual cost, and I am intrigued to know what assumption he made on how that cost would build up. Does he expect growth to continue at the rate of the increase in sales that took place towards the end of last year prior to the closure of the schemes? Does he expect the rate of growth to plateau? Or was there simply pent-up demand out there, because people who could not previously afford to take out such cover suddenly rushed to do so?
	The regulatory impact assessment does not make it clear how the Government reached the £160 million figure—I presume that the logic is more robust than the estimate of negligible cost, which the Government made when they introduced the pre A-day consultation. It will be interesting if the Economic Secretary elaborates in his answer on how officials calculated the cost of £160 million.

Edward Balls: indicated assent.

Mark Hoban: The Economic Secretary has nodded, and I am delighted that we will be furnished with that information.
	I want to refer to a broader point in that context. At one level, this Government, more than any other Government, understand the behavioural impact of changes to the tax regime; otherwise, the Chancellor would not meddle in the tax regime quite as frequently as he does. At the same time, there has been a fundamental failure properly to think through the behavioural impacts of those changes and the extent to which increasing reliefs, cutting rates or increasing allowances would change people's behaviour. The Association of British Insurers indicated prior to A-day that those products would have a positive impact on the term assurance market, with new policyholders taking advantage of the increased affordability of products.
	The Treasury does not seem to have responded. It does not seem to have thought through whether the situation would encourage new participants to enter the market and offer new policies to try to close the protection gap. One of the problems is that the Government have not properly thought through their A-day reforms; that is why this is the third U-turn on those reforms since they were enacted in the Finance Act 2004. Slowly but surely, the Economic Secretary is unpicking the work that one of his predecessors, the right hon. Member for Bolton, West, did when, as Financial Secretary, she was responsible for the same areas. I feel sorry for her at times. She must be wondering why on earth she spent so much time working on these reforms only for the Economic Secretary, who was at the Treasury at the time advising the Chancellor in some capacity, to conduct a series of U-turns once they were on the statute book.
	We can see how, and how quickly, the Treasury's approach to pensions has unravelled over the course of the past couple of years in moving on from the intention that was set out in the then Financial Secretary's speech in Standing Committee only three years ago. In the context of the Pensions Commission report, the 2006 Budget said that one of the five tests that the Chancellor set to see whether these reforms were acceptable to him was whether they would promote personal responsibility. Yet here we are with a product that would appear to promote personal responsibility and reduce dependency on the state but that the Government are seeking, through this clause, to abolish.
	In last year's pre-Budget report there is a section headed "Fairness for tomorrow's pensioners", where, at paragraph 5.77, the Government casually say that they have
	"become aware that, at a result of the flexibilities that the new pensions tax regime has brought in, life insurance policies that provide lump sum death benefits alone are being offered as personal pension arrangements eligible for pensions tax relief."
	If the industry knew about it prior to 2004 and A-day, why did the Treasury just happen to become aware of it? Surely it should have played a much more active role in understanding what was happening in the market and what would be the impact of the legislative changes that suddenly crept into the Finance Act 2004.
	In this year's Red Book, we have greater amplification of the Government's approach to pensions tax relief so that no one can be in any doubt about what might happen in future. It sets out some key principles that have guided and continued to underpin the Government's approach to pensions tax relief, one of which the Economic Secretary repeated in his brief opening remarks. It says that
	"generous tax relief is provided for pension saving to produce an income in retirement. Pension saving is not, however, provided to support pre-retirement income, asset accumulation or inheritance".
	Let us ponder for a moment the meaning of that principle. The death in service benefit that our widows and widowers receive on our death as Members can be used to be invested in an income in the same way as a widow's pension. It can be used as an alternative to pay off the mortgage so that their existing income is protected. Yes, we are talking about a lump sum that is gained on death, but the purpose to which it is put can enhance the widow's or widower's pension by supplementing it through direct investment or by repaying the mortgage debt with which so many people are burdened.

Philip Dunne: Will my hon. Friend give way?

Mark Hoban: I would like to make some more progress, but I am happy to give way.

Philip Dunne: Will my hon. Friend clarify whether such payments into pensions arising on death in service will be made free of taxation?

Mark Hoban: If one is a member of an occupational scheme, the contributions are subject to tax relief, and many such schemes clearly include death in service benefits. The Government are trying to remove the opportunity for those who are self-employed or not part of such a scheme to receive the tax relief on a stand-alone, pension term assurance policy. Another key principle that underpins the Government's approach to pensions tax relief emphasises that point. The Red Book states that
	"incentives for employer contributions are provided as it is more efficient for pensions to be provided on a collective basis through the employer".
	What happens to those who are not in employment—the self-employed and temporary workers? They will not benefit from tax relief on a stand-alone policy. Indeed, other changes make it more difficult for them to get that tax relief. They will have to bite the bullet and not only pay the costs that we pay in our pension contributions and the sort of costs that the Exchequer pays into the parliamentary pension scheme, but get no tax relief. They are therefore hit by a triple whammy and in a far worse position than us as employees in the context of death in service benefit and how to fund it.

Edward Balls: This is the last time that I shall try. The hon. Gentleman has clearly outlined the principles that guide the Government's approach, which I set out in a speech a month or two ago and has appeared in repeated documents. His speech makes it clear that he disagrees with those principles because he advocates the use of pension tax relief to pay for term assurance, life assurance and products for individuals. As I said, that is a reversal of the 1984 position. I shall give him one last chance to confirm that he is taking that principled position. He was concerned when I suggested that it was unprincipled. Have I outlined his principled position? This is his moment.

Mark Hoban: I acknowledge the Economic Secretary's persistence. He is trying hard and, at some point, I might satisfy him. However, he ought to tell the Committee why the Government sought in the Finance Act 2004 to reverse the position that was adopted in the early 1980s. I am intrigued to hear his arguments.
	My point in opposing the measure is more about the Treasury's chaotic approach to policy making and the impact of the change on consumers and the industry. It is clear from speaking to people in the sector that there is a problem with the protection gap. The Economic Secretary and I support the concept of financial inclusion and want to spread to more people the benefits that those of us who are lucky enough to be in employment enjoy. We should consider carefully the way in which we spread those benefits, but that is not a commitment to tax relief because, as I said yesterday, we are not in a position today to write the first Budget of the next Conservative Government.

Stephen Hesford: Does the hon. Gentleman's opposition amount to agreement with the Government?

Mark Hoban: That was a simplistic question. People oppose measures for many and varied reasons. If the hon. Gentleman survives into opposition, perhaps he will understand the way in which such decisions are made. I am not sure whether I hope that he experiences that, but he might.
	My final quote from the Red Book demonstrates the hubris of a Government who are 10 years into their life. It states:
	"The Government recognises the importance of a stable environment that allows the pensions industry to plan ahead and minimise disruption to the regimes already in place that are working well."
	That comes from a Government who have already made three main U-turns on their post A-day reforms. How many more are consistent with maintaining
	"a stable environment that allows the pensions industry to plan ahead"?
	When the Economic Secretary read that bit and let it go through, he must have smiled at the irony of those remarks, and at how many people in the industry would not recognise the Government's principle in relation to the reforms of the pensions system. Another principle is that the cost of pensions tax incentives must be affordable and fall within current fiscal projections. I am sorry that I forgot to mention that earlier, because it is relevant here.
	This raises a doubt in my mind, and in the minds of those in the industry, about what other changes might be planned if the cost of these reforms continues to mount. Will the Economic Secretary unpick other measures in next year's Finance Bill? Will the Government take fright at the levels of the lump sum contributions that many people are putting into their pension schemes this year? I recognise the importance of the argument about affordability, but this leaves the door open to further U-turns in the future.
	Where does this leave the consumer and the industry? Let us consider the industry first. It estimates that it has invested some £35 million in new systems and processes to introduce the type of policy that the Government have created, and that sum will have to be written off. This sudden withdrawal without consultation has left an estimated 50,000 policy holders in the pipeline. Insurers could not deal with inquiries promptly because there was so little information available from the Treasury when the announcement was made.
	The final details of the transitional arrangements were announced only on 13 April, a few days after the previous deadline had expired. That is not an orderly way in which to conduct business. I know that the industry is pleased that those transitional changes have been made, and we should welcome them on that basis, but this is not the way to make policy. All sorts of changes had to be made by the industry: automated advice systems had to be amended to redirect customers to alternative products, for example, and the industry now has sub-scale portfolios of business to administer for the next 25 years or so.
	The Minister and I agree on the importance of maintaining London as a global financial services centre, and we recognise that insurance, along with other financial services, covers a global market. Companies seeking to expand their businesses need to think carefully about how and where they use their capital. It will not help the UK market if there is a perception that we have an unstable, unpredictable pensions tax regime.
	It is also worth pointing out that the industry has sought to reach a compromise with the Treasury on this issue. It has come forward with a series of proposals to facilitate the continuation of this type of business, as it recognises the importance of the protection market. It is also thinking of ways of avoiding writing off such a large investment in the new systems. It has proposed that all pension term assurance offers would contain clear information about the pension to which they were linked, including details of the provider and a policy number, reinforcing the link that the Government think is so important between the term assurance and the pension. That would produce an integrated policy that provided a pension and a lump sum death benefit. The industry made that proposal so that contributions could continue, but the Treasury rejected it. In effect, it rejected that position before A-day.
	The lack of clarity in the Government's position on integrated products is such that in one of today's amendments to schedule 18 we see explicit recognition of that type of policy and of the new transitional arrangements involved. The industry also suggested, as an alternative, that it would cap the amount of the lifetime allowance that could be utilised by taking out term assurance. A third of the allowance, about £500,000, was suggested, but again the Treasury rejected this attempt by the industry to reach a workable compromise.
	Many consumers have therefore been left with a protection gap. Those who are outside an occupational pension scheme will have to pay more for the coverage that all Members of the House take for granted. There is an uneven playing field, which favours those who are lucky enough to be in jobs that have a death in service benefit as part of the package, and disadvantages those who are self-employed or contractors. Perhaps more sole traders will be encouraged to incorporate, despite the Government's best efforts yesterday, to access the tax relief that comes from being an employee.
	Another important issue is that consumers and industry cannot assume that just because something is a Government policy one month, it will be a policy next month, next year or the year after. That undermines consumer confidence in saving for the long term. In a subtle but important way, it undermines the Government's long-term goal for more people to take responsibility for their financial affairs. That has a destructive effect on the industry and on consumers' willingness to plan for the long term. Every Member of the House recognises the importance of that, and we have had many debates about the Pensions Bill, which is an attempt to encourage more people to save for the long term. One message seems to be coming out from the Department for Work and Pensions, and a different one from the Treasury and the Economic Secretary.
	Two quotes highlight the combined impact of the change in policy. First, Vanessa Owen of Liverpool Victoria—perhaps I should start to pay her royalties, given the number of times that I have quoted her—said:
	"Our members and customers who do not have access to life assurance through their employer are now at a greater disadvantage because the option of tax relieved life protection has been removed."
	Secondly, according to AEGON,
	"Not to mention a complete waste of millions of pounds in making pension term assurance available in the first place, following extensive consultation with the Treasury."
	Finance Bill by Finance Bill, the Economic Secretary unpicks the work of the former Financial Secretary, the right hon. Member for Bolton, West. Instead of the clear, simple scheme that she advocated, we have an increasingly complex and restrictive scheme. It is surprising that the pitfalls were not seen, and warnings not given, when the legislation was introduced in 2004. The Bill is destructive—it undermines the confidence of consumers in the stability of the Government's pensions policy, inhibits both innovation and the sector's willingness to respond to Government initiatives, and is destructive of the Treasury's ability to make policy in an area in which long-term stability is fundamental if we are to promote long-term savings.

Vincent Cable: The hon. Member for Fareham (Mr. Hoban) spent three quarters of an hour teasing out the issues, as he put it. I shall be very much briefer.
	The hon. Gentleman started well in explaining the origins of pension term assurance, and making the point that it was an entirely innocent and reasonable way in which the industry should evolve. All individuals are faced with the question of how to hedge the risks when they look forward to their old age. There is the risk of death, and in that regard we provide for our dependants either in the form of a widow's pension or a lump sum. We must also hedge against the risk of living, and therefore provide an income for ourselves. It is entirely sensible and natural that the two sets of risks should be considered together, as many pensions providers do, and many of us are beneficiaries of such an arrangement. It was therefore natural that the industry should evolve a product that sought to provide those two activities together: pension term assurance. As the hon. Member for Fareham pointed out, in 2004, the Government saw no problem with that, and extended tax relief.
	With regard to the Government's answer, about which the Economic Secretary has intervened several times, there are two issues. He has laboured the point about the need to maintain the integrity of the distinction—which he calls the principle, although it is probably more an established practice than a principle—between tax relief for pensions and tax relief for life insurance. Clearly, that is established practice, and must be maintained. The practical issue, however, is not so much the restatement of that principle as tax avoidance. There are clearly individuals who have seen, and would see in this new product, an opportunity to maximise tax relief on life insurance products, particularly if they have high incomes and are able to take advantage of higher rates of relief.
	What I would like to know—and the Economic Secretary might strengthen his case if he told us—is how much of the £150 million or so that the Government hope to retrieve originates in the higher tax relief. If it is true that, as the hon. Member for Fareham suggested, this product was designed principally for people on low incomes, we can see that it may have evolved in a fairly innocent way; but if it is designed for high earners—we are talking about 40 per cent. tax relief—I am more sympathetic to the Government's view that there is a potential for avoidance. It would be helpful if the Economic Secretary could give us an idea of the relative proportions.
	The Liberal Democrats approach the matter differently from the Conservatives: from the opposite direction, in a sense. We are not trying to maximise the scope for tax relief. Generally, we have gone rather further than the Government in arguing that there is no justification for giving people on high incomes not just more tax relief, but higher rates of tax relief, on pensions, let alone life insurance. However, we agree with the Conservatives that the distinction between what happened in 2004 and what happens now has created confusion, and has not been terribly well handled.
	I should like to hear from the Economic Secretary how the Government responded to proposals from the industry. The hon. Member for Fareham summarised ways of meeting the Government's requirements that had been suggested by the Association of British Insurers and others, some of which seemed perfectly sensible at first sight.
	If the Government's primary concern was to maintain the link between life insurance and pensions, organisations in the industry were willing to propose ways of checking that it was being maintained. They suggested, for instance, that if someone died and life insurance was claimed, it should be checked that there was a parallel pension product to maintain the integrity of the connection. Perhaps the Economic Secretary will tell us whether that proposal was explored, and whether it was deemed feasible. Organisations also suggested a limit on the tax relief that could be available, and a mechanism for fraud checking.
	I have a sense that the industry has gone out of its way to try to meet the Government halfway, addressing their central concern that there must be a link between the life insurance and pension elements. As for how far the Government have gone to meet the industry's concerns, I have an open mind. Our stance on whether the clause should stand part will be determined partly by how they respond.

David Gauke: I want to reiterate some of the points made by my hon. Friend the Member for Fareham (Mr. Hoban) in his comprehensive and thorough speech. I shall cover some of the same ground, however, because it would be difficult not to: my hon. Friend really did cover the waterfront. It is worth my repeating one or two of his points in the hope of provoking an answer from the Economic Secretary.
	It is not entirely clear what was the rationale for the simplification of the rules governing pension term assurance in the Finance Act 2004, which came into force on 6 April 2006. The Economic Secretary made it clear that it was never the Government's intention to encourage the granting of tax relief on products that were not connected with pensions, but that gives rise to one or two questions. There was no real explanation or debate about the issue during the passage of the 2004 Act. As for the rationale, as my hon. Friend the Member for Fareham pointed out, it was rather slipped through.
	So what, if it was not simplification, was the justification for extending the relief to pension term assurance?
	What happened after 6 April 2006 to make the reforms in the Finance Act 2004 so unattractive and undesirable? We have had an answer from the Economic Secretary on that: the provision was used for non-pension purposes and for lump sum purposes. However, that begs the most important question, which my hon. Friend the Member for Fareham dwelt on: why was that not anticipated at the time?
	One has to put that in the context of a number of cases. Yesterday, we debated the rate of corporation tax for small businesses. We have seen change after change: the introduction of a 10 per cent. band, then a zero per cent. band, which was abolished last year, and now the small business rate is increasing. That is an example of the Government introducing a policy and businesses altering their behaviour accordingly.
	We have seen something similar with pension term assurance. Does it not worry Ministers that there often seems to be an almost systemic failure within the Treasury to anticipate the consequences of tax changes? Every year, a Finance Bill is presented and contains detailed provisions. The Treasury is keen to encourage certain types of behaviour and discourage others, yet it does not have a good record of judging what the consequences of the changes will be. This appears to be a very good example of that. Surely it could have been anticipated that pension term assurance would be used in the manner in which it has been. Within only a few months, the Treasury has been forced to change policy.

Edward Balls: I am sure that the hon. Gentleman will remember the debates in the House over the issue of self-invested personal pensions, where it was regularly put to the Government by Opposition Members that SIPPs needed to be addressed—and subsequently they were. We debated that during the passage of last year's Finance Bill. Does he agree that, prior to the pre-Budget report announcement of action, no points were put in the House by any Opposition Members to the Government about the need to address term assurance at any stage? We have all agreed that action is necessary to protect the revenue base.

David Gauke: The hon. Gentleman may be right that those points were not made during the passage of the 2004 Finance Bill. One would have thought that the Treasury would be looking to spot those pratfalls. The Opposition do point out failures. I referred earlier to the zero per cent. band for corporation tax for small businesses, which was highlighted as a possible concern by Opposition MPs. There are times when things are not spotted by Opposition parties, but the hon. Gentleman will know—he was heavily involved in opposition—that our resources, compared with what is available to the Government and Treasury, are somewhat limited. He had access to a hotel room off Park lane, but those were perhaps the best facilities that any Opposition party has had. Often, one is talking about small numbers of people, but the Treasury is a mighty machine. It has the crème de la crème of the civil service working on these matters, yet constantly it seems to fail to spot some of them.
	I would have thought that Ministers are concerned about that. There is certainly an example here of the Treasury not spotting the way in which a tax change would affect behaviour. That is not necessarily a party point, but it is a concern. I would have thought that Ministers ought to acknowledge that and be worried about it.

Rob Marris: May I gently suggest to the hon. Gentleman that he is over-egging the pudding? Labour Members might take on board his point—although we might not agree with every particular of it—in respect of SIPPs or the incorporation issue when some individuals and organisations said at the time, "Do you realise that such-and-such a change could lead to such-and-such a consequence?" My somewhat hazy recollection from having served on the Finance Bill Standing Committee in 2004 is the same as that of the hon. Member for Fareham (Mr. Hoban): no one was making that point. The hon. Member for South-West Hertfordshire (Mr. Gauke) talks about resources in opposition, and I understand that point. However, any Member who has served on the Finance Bill Standing Committee, as he has, knows that members of that Committee get bombarded—quite properly in a democracy—with submissions from outside organisations, such as the Chartered Institute of Taxation, setting out their views on the proposed legislation. I stand to be corrected, but I do not think that there were any such submissions about this change in 2004, so it differs from the other two issues to which the hon. Gentleman has referred, which is why I suggest that he is over-egging the pudding.

David Gauke: I am grateful for that intervention. The hon. Gentleman and I have served on Finance Bill Committees before—he more often than me—and I think that it is fair to say that businesses that lose out as a consequence of tax changes tend to be the most vociferous in their lobbying of Committee members. The area under discussion was simplified by the Finance Act 2004, and it is unsurprising that there were relatively few contributions from industry as—I understand, because I was not a Member at the time—it generally welcomed the contents of the 2004 Act. That might explain why fewer submissions were made, but circumstances in which tax change measures favour industry are perhaps those where the Treasury ought to be most alert and most alive to the potential impact.

Mark Hoban: My hon. Friend makes an important point about the extent to which people advise us that specific changes will have adverse consequences. It is my understanding that the Treasury should have been aware of the take-up prior to A-day. Certainly the industry believes that that was discussed with the Treasury prior to A-day. Therefore, although it might not have been able to make any changes to the Finance Act 2004, it certainly could have done so in the Finance Act 2006 on which I served, along with the Economic Secretary and the hon. Member for Wolverhampton, South-West (Rob Marris). That might have been the forum in which to make such changes, because I understand that the Treasury was aware then of the issues we are discussing.

David Gauke: I am grateful to my hon. Friend for his comments, although I must say that, recalling the Finance Act 2006, I am not sure whether I can support the idea that an additional measure should have been included in it. On the contrary, perhaps we should be grateful that that did not happen. However, my hon. Friend makes an important point on the substance of the case.

John Bercow: I entirely understand my hon. Friend's lamentation that on the whole one certainly does not look for additional items to be included in Government legislation; on the whole one searches for measures that can be deleted from it. However, I hope that my hon. Friend agrees that, whatever the complexity of Government proposals, that is no excuse for unintelligibility. As a parliamentary point, let me say that when the Government decide that a change is needed, it is important that wherever possible that should be stated in clear terms in the Bill in question. Is my hon. Friend concerned that the order-making power in schedule 18 allows for regulations, the content and detail of which we in this House might not see until some time after we have voted for the legislation? That will not do, it is not satisfactory, it happens under Governments of both colours and it ought to be changed.

David Gauke: My hon. Friend is a doughty defender of Parliament, for which we should be grateful, and he raises an important constitutional point about supervision. However, this Finance Bill, in contrast to last year's, could do with more substance.
	Let me turn to a couple of additional points, which I would like the Economic Secretary to address. What analysis has the Treasury conducted on who will lose as a consequence of this tax change? It seems that there are certain beneficiaries of the Finance Act 2004—the self-employed, contract workers and so on, who would not normally be able to participate in occupational pension schemes that provide some kind of life assurance lump sum. The purpose of the 2004 changes might have been to simplify the system and to make better provision for these people, but it seems that they have suffered as a consequence. I might be wrong, however, and I should be grateful for enlightenment from the Economic Secretary.
	I should also be grateful if the Economic Secretary clarified the impact of the following development, which my hon. Friend the Member for Fareham addressed. My understanding is that before A-day—6 April 2006—tax relief was available for those individuals wanting to buy term assurance, if they were part of a pension plan that also provided pension benefits. As I understand it, that will no longer be the case, and I should be grateful—

Edward Balls: indicated assent.

David Gauke: From a sedentary position, the Economic Secretary gives a conclusive, authoritative nod. Term assurance is therefore more limited than it was before A-day, so this is almost more than a U-turn. We are not just going back to the position before A-day.
	I turn to my final point.

John Bercow: Surely not.

David Gauke: I am afraid so. I have a final question for the Economic Secretary, on stability in the pension system, which my hon. Friend the Member for Fareham discussed in his conclusion. There have been a number of tax changes to the pension system. Has the Treasury analysed the impact of these frequent changes? Is the Economic Secretary concerned that such frequent changes increase instability? If there is an unstable environment—if people do not know where they will stand and what the tax system will be next year, or in two or three years' time—it does not encourage them to save. We surely need to look at that issue. I appreciate that there are difficulties and that we need to get the system right, but such constant tinkering—the constant attempt to encourage a particular approach, only to discourage it on seeing its perhaps being overused—is characteristic, I am afraid, of the way the Treasury has been run in the past 10 years. Such tinkering is not necessarily good for stability, or to the long-term benefit of this country.

John Bercow: I am very grateful to my hon. Friend for giving way. The immediate impact on consumers of change after change should rightly preoccupy us, but there is another respect in which constant changes and growing levels of complexity are unhelpful: they tend to discourage market entry by smaller-scale providers. One can end up, even without having intended this consequence, with a lack of competitiveness and a concentration of power in the hands of a relatively small number of highly powerful operators, who tend to enjoy better access to Ministers. That does not necessarily conduce to the public interest.

David Gauke: My hon. Friend again makes a very important point. As is generally the case with financial services—and, indeed, in other areas—if we want to provide good products and services, competition is very important. Encouraging new entrants into the market and encouraging innovation is a very important part of any policy, but the level of complexity is making matters difficult for new entrants. It is not just a question of having the ear of the Government, but of the ability to pay legal and accountancy fees. As is often the case, I fear, too much complexity is causing us great difficulty.
	However, I am straying from the clause under consideration, Sir Michael, and before I get into trouble I should like to conclude by reiterating that there are a number of questions that the clause raises, and I hope that the Economic Secretary will be able to answer them in his forthcoming speech.

Philip Dunne: I have three brief points to make. My hon. Friend the Member for Fareham (Mr. Hoban) was right to take this opportunity to chide the Government for their conduct of the issue of pension term assurance. He did so with considerable skill and took us back through the historical development—or lack of development—of Government policy on this matter.
	When the then Financial Secretary—now the Secretary of State for Communities and Local Government—introduced the proposals for pension simplification and A-day in Committee on the Finance Act 2004, she also described her intentions. She said:
	"Our proposals will create a transparent, consistent and flexible system that is readily understood."
	I am sure that we would all agree that had that happened, it would have been a sensible ambition. However, from what we have heard today, the then Financial Secretary, her advisers and the Treasury did not understand what they were introducing. Now, three years later, we have to use up four pages of the tax code in schedule 18 to undo the damage that was done in 2004. It is right, therefore, that we take this opportunity to remind Ministers, and the industry outside, of the way in which the Government have conducted affairs and the consequences of some of their policy implementation, which were not clearly understood at the time.
	The then Financial Secretary also said that the proposals would
	"make it easier for people to concentrate on things that matter, such as when and how much to save for their retirement, rather than on trying to understand anomalies between the different tax regimes." ——[Official Report, Finance Public Bill Committee, 8 June 2004; c. 427.]
	However, the provision is now being scrapped as a perceived anomaly that favours a particular type of life assurance cover over another, and it was introduced by this Government.
	The Association of British Insurers has not hesitated to point that out. It is perplexed that tax relief has been withdrawn from pension term assurance products, a market that the Government helped to create. It did not exist three years ago: it was the Government's measures in 2004 that brought it about. As my hon. Friend said earlier, the industry was in discussion with Government officials about the product. In the run-up to A-day, the Government were well aware that the product was being developed, but they did nothing to discourage that.
	My second point relates to the impact on policyholders. Research by Scottish Widows indicates that the households most at risk from this measure are not the wealthy, as suggested earlier, but those with an income above £20,000—so not the poorest, either—but with less than £30,000 in savings. They are middle Britain, and the people whom the Government should be encouraging to make provision for their retirement and unforeseen occurrences in their lives. Emma Walker from moneysupermarket.com has said that its research shows that some one in 10 life insurance customers have already made the switch from a conventional life insurance product to a pension term assurance product, so the change will affect a significant proportion of people.

Robert Goodwill: My hon. Friend is making a valid point about whom the proposals will affect. However, does he agree that farming, where self-employment is rife, and the construction industry are among those sectors already hard hit by other economic factors that will be hit again by the proposed withdrawal of the measure?

Philip Dunne: My hon. Friend makes an excellent point. Clearly, some sectors will be affected more than others, in that they will have been the focus for the marketing undertaken by the insurance companies providing the products that we are debating. The people affected may well include farmers, in both his constituency and mine.
	My final point has to do with the impact that the measure will have on the industry. The Government led the industry to develop these products: last September's pre-Budget report gave a clue that adjustments were likely, but not even the Budget itself made it clear that the policy would be scrapped. My hon. Friend the Member for Fareham was right to say that the details were hidden in the small print of the Finance Bill published in April. If the proposal comes into law, it will deal a hammer blow to the products under discussion. They will be killed stone dead.
	The industry has invested £35 million in developing the products, but we are led to believe that that money will be written off, as there will be no return on it at all if the proposals in the Bill are accepted. In addition, over the next 25 years the industry will have to manage the run-off of the 50,000 or so policies that have been taken out, as they cannot be cancelled or exchanged. Companies that had anticipated building up large portfolios of such business over a number of years are now looking at having to manage a small portfolio of less than critical mass over 25 years.
	That will add a cost burden to the industry for many years to come, even though the Government just now are seeking co-operation and assistance from everyone in the life assurance and pensions industries who is involved in the promotion of lifetime savings. The Government want to work with the industry, as much more substantial pension plans will come through in other legislation, but they have dealt it a difficult blow.
	I would not describe it as a body blow to the industry, as I do not want to exaggerate, but the industry has come to see that the Government who led it down a certain path three years ago have now moved to block that path. That has happened at a very unfortunate time in the Government's relationship with the industry.

Edward Balls: In my opening remarks, I set out the background to the Government's decision taken at the time of the PBR and then the Budget. We have had an interesting debate, and I want to respond to a number of points that have arisen. I shall begin by putting the proposals in context, in terms of both principle and history. Much of the discussion has been about the process through which we reached the A-day reforms, and about their consequences, so some contextualisation is appropriate.
	The hon. Member for Fareham (Mr. Hoban) talked about the Government's principles, and almost got to the point of agreeing with them. I fear that the speeches of some other Opposition Members contradicted that approach, but that is by the by.
	In a speech to the National Association of Pension Funds in March, I set out the principles that have guided, and continue to guide, the Government's approach to pensions tax relief. I shall set them out again for the Committee. First, we believe that generous tax relief is provided to support pension saving where that produces an income in retirement. Pensions tax relief is not there to support pre-retirement income, nor to support accumulation or inheritance. Secondly, we believe that pensions should be provided with more favourable tax treatment compared to other forms of saving, in recognition of the fact that they are less flexible than other savings and that they are locked away until retirement. Thirdly, we believe that incentives for employer contributions should be provided, as it is more efficient for pensions to be provided on a collective basis through the employer, Finally, we consider that pensions tax incentives must be affordable and fall within current fiscal projections.
	It is important to set out those principles again, as they have guided the Government's decisions over recent months and years. They have also guided our approach to term assurance and pension term assurance, and I shall refer back to them during the course of my speech.
	I also want to set out some history. In an intervention on the hon. Member for Fareham, I said that the Conservative Government of the day withdrew tax relief on life assurance premiums in the 1984 Finance Bill. The policy issues debated at the time were slightly different from those that pertain today, but I have read the debates and remain struck by the similarities and echoes between then and now.
	In particular, it is clear that the Government of the day were concerned that the relief was being used for circumstances that were not intended. That meant that most of the relief was of no real benefit to the general body of taxpayers, and that any attempt to target the life assurance premium relief more precisely would be both potentially expensive and difficult. That was why the then Government decided that the only solution was to withdraw the tax relief altogether—a pragmatic solution that took account all the different factors.
	The system left in place following the 1984 changes allowed relief, restricted to 5 per cent. of earnings, for contributions to a personal pension scheme for life insurance products. However, the term assurance market that was linked to pensions accounted for only a very small percentage of the overall term assurance market.

Rob Marris: Does my hon. Friend recall that the 1984 abolition had an unintended consequence? I want to be generous to the Conservative Government of the time, but the consequence was that people getting mortgages stopped taking out the life assurance policies on which hitherto they had been able to get 15 per cent. tax relief, and piled into low-cost endowments that were widely mis-sold. This Government are still trying to sort out the mis-selling that was provoked as an unintended consequence of the Conservative Government's change of tax rule on life insurance premiums.

Edward Balls: I hear what my hon. Friend is saying. He is almost certainly correct, albeit somewhat partisan. I shall learn lessons from what he has said, but I am attempting to forge a consensus with the Opposition and so shall move on.
	As I was saying, there was an earnings relief of 5 per cent., but the market remained very undeveloped. Essentially, term assurance is a pretty low-cost, high-volume sort of market, and the amount of tax relief available was not sufficient.
	This Government reviewed the position at the end of the previous decade, as part of establishing an integrated tax regime for personal and stakeholder pensions. Consultations were held in September 1999 and February 2000, and the Government consistently made it clear that
	"pension contributions are not a way of getting tax relief on various insurances that would not otherwise qualify for relief."
	The Government held that the primary aim of pension tax relief was to encourage saving in a pension. After the consultation of February 2000, the Government stated:
	"Many respondents argued that it should be possible to include an element of life assurance cover within a pension. But they did not support the use of a flat rate limit... The Government has decided that life insurance can be included so long as it does not exceed 10 per cent. of the contributions paid."
	History shows that what had been a very small market before that decision became a negligible one, and that 10 per cent. of overall contributions was not sufficient to incentivise people to go into the pension-related term assurance market, given the nature of the business.
	The Government embarked on a process of simplification, at each point making it clear that the goal was
	"to encourage people to save in a pension".
	That was what drove our thinking. In the second pension simplification document of December 2003, we said that
	"the Government wishes to ensure that pensions remain a vehicle for providing income in retirement...Pensions saving is to provide an income in retirement...It is not a route for conserving and passing on capital".
	That was the background to the debate on the 2004 Finance Bill, when the then Financial Secretary undertook the pensions simplification process. However, there was no reference in the legislation to pension term assurance—the expression did not exist at the time. The market for pensions-related term assurance was negligible at the time, and there was no intention to encourage a term-assurance market link to pensions, nor any discussion of such an intention during proceedings on the Finance Bill. There was a simplification of the pensions and tax regime to provide income in retirement.
	There was some discussion between the industry and the Government as to whether the simplification would lead to the growth of a pension term assurance market and whether the changes in tax relief for pensions might lead to migration or churning in the term assurance market. However, there was no consensus for the view that the changes posed a material risk. Following discussions with industry players, the then Financial Secretary concluded that there was not a material risk that the changes we were making to tax relief for pensions retirement income would be likely to lead to a rapid growth in a pensions-related term assurance market.

Mark Hoban: Given the history of tax relief for life assurance, is the Economic Secretary surprised that his predecessor made that mistake?

Edward Balls: We had an interesting debate on those matters earlier, when my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) referred to debates on past Finance Bills. In an intervention, I mentioned SIPPs. At the time, public debate and Members made it clear that there was concern that the SIPPs changes could have undesirable effects and the concerns were dealt with then. However, there was no discussion of the term assurance issue during the Finance Bill; it was never raised by Opposition Members and nor was it a subject of public debate. Technical discussions as to whether the changes posed a material risk concluded that they were not, and that the benefits of simplification outweighed the risk. It was not a mistake; it was a judgment that simplification benefits were more important than a risk that, at the time, was judged not to be material.
	That was the position for the next two years and during the run-up to A-day. However, by September 2006 it became clear that although the products were completely within the law—they were not the means of tax avoidance—a substantial re-badging of the term assurance market was taking place. Many life companies did not sell the products as pension term assurance, which would have been a confusing label as they had nothing to do with pensions; they were about death benefit. The policies were often marketed as term assurance with tax relief—term assurance with the benefit of pension tax relief. In many cases, they were not marketed as pension tax relief.
	I was asked for some figures. Before A-day the number of contracts sold that could be described as pension tax relief—term assurance linked to pensions—was in the low thousands; the number was negligible. In the fourth quarter of 2005, the number of mortgage-related term assurance contracts sold was 238,154. From the beginning of 2006, when almost no policies were being sold, the number rose to 58,046 products—from almost nothing to 20 per cent. of the term assurance market—whereas the number of mortgage-related term assurance products fell from about 238,000 to 190,161. What happened was perfectly understandable and, in retrospect, predictable: a substantial, tax-driven switch from mortgage-related term assurance to a term assurance that qualified for pension tax relief, but was often not marketed as such because it had no pension income. To my mind, and that of several Members, including perhaps the hon. Member for Fareham, that was not what we intended; our intention was not that pension tax relief should be used to sell what was, in essence, a non-pension product.
	Last autumn, it was put to me that costs anticipated as negligible to the Exchequer were set to rise from about £25 million last year to about £160 million a year in five years' time—as the hon. Member for Fareham pointed out. Over a five-year period there would be a cost to the Exchequer of slightly more than £500 million. That is £500 million of taxpayers' money being spent on tax relief actions that people had previously taken without tax relief for, in essence, the same product—a non-pensions-related death benefit that some years before we, as a country, had decided not to tax-advantage. All our consultation documents made it clear that was not our intention and that was why we decided to act in the pre-Budget report.
	The report made a clear statement that there was a substantial risk to the taxpayer, that the practice was outside our intentions and that the right thing was to address it with immediate effect. That is what we did. However, we did not say that there was necessarily an end to any link between pensions and term assurance. With the pensions industry, we wanted to find out whether we could establish an ongoing, meaningful link between term assurance policies and saving for a pension, which would not have disproportionate costs and would not mean that a large proportion of the tax relief was going to a death benefit rather than to pension saving.
	We consulted the ABI, the Association of Independent Financial Advisers, the Society of Pension Consultants and the Investment and Life Assurance Group. The area is complex and we looked at several options: a test at the point of sale, to confirm that the policyholder was also a member of a relevant pension scheme; a cap on the total sum assured; a test at the point of claim; and ongoing sampling of policies by HMRC to check for fraud. Some in the industry, including the ABI, considered that some of the options might be workable, but after our consultation we found it impossible to set out a way forward that would be both commercially viable and consistent with our intentions and principles.
	The problem was that the checks needed to make sure that term assurance, which is a high-volume low-margin product, was genuinely pension-related were disproportionate to the administrative costs that the industry could bear. A cap could work only if it was so high that there would be a death benefit rather than a pension income benefit. We would then have been forced to concede the sum of £500 million over five years. The people selling those products would have been willing for us to make that decision, but we felt that we could not do so because we could not justify expenditure of £500 million on what was largely a deadweight cost.
	That is why we decided to bring tax relief back into line with our intentions and to make it clear that we could not see a way forward that was consistent with our principles. Some in the industry agreed with our approach. An expert at AEGON Scottish Equitable said:
	"Although we understand the ABI's position, we do not think"—
	its proposals are—
	"a workable solution for providers or for customers. At the very least, it will introduce a need for additional resource from providers, which will be met ultimately in adjusted costs for customers. Ultimately, it could mean providers withdrawing from the market."
	It was on that basis that we decided that we could not proceed.
	The hon. Member for South-West Hertfordshire (Mr. Gauke) asked about losers—an issue also taken up in an intervention by the hon. Member for Ludlow (Mr. Dunne). The fact is that before A-day, the market barely existed: it was negligible. The market then grew very rapidly. Everyone who took advantage of it during that period is grandfathered—we are not withdrawing tax relief from anyone who took out products up to the time of the pre-Budget report, or, indeed, for a period afterwards when transitional arrangements applied. Our tax changes take us back to the position ex ante. There are no losers, though people who might have benefited from the more lax regime in future will not do so now because we have gone back to the status quo. As I have explained, I think that the right decision was taken.

David Gauke: I note that point, but has the Treasury done any analysis of the type of people who were taking advantage of the regime in the period after A-day and before the pre-Budget report announcements?

Edward Balls: As I said, all the people who were taking advantage will have their benefits protected. It is not true to describe those people as either the very rich or tax avoiders. We are talking about people who previously took out mortgage-related term assurance or life assurance products and then benefited from the tax relief that came from the re-badging of those life assurance policies. It was never our intention—nor, in my view, the intention of the House—to tax advantage those life assurance policies. That is why we are returning to the status quo.

David Gauke: I am seeking clarification about whether a particular type of person benefited from that regime while it existed? For example, was it generally the self-employed or contractors who took out this sort of product in the relevant period?

Edward Balls: No, I do not think so. Those who benefited were those who took out assurance policies such as life assurance. I pressed the hon. Member for Fareham to agree with me a number of times about that and eventually, on my fourth attempt, he did. Unless the Conservative party is willing to put up the £500 million to pay for an alternative proposal, I think that the hon. Gentleman and I are agreed that tax-advantaging life assurance products through pension tax relief is not the way forward. If so, we were right to sort out the problem at the earliest opportunity. We did so, despite the fact that in the period before we took our decision, we were not pressured by Opposition Members or anyone else to do so. As I said, we put transitional arrangements in place, which were widely communicated to the industry and, I think, welcomed by it as a way of sorting out the difficult pipeline cases. Indeed, we were praised by the ABI for so doing.

Rob Marris: Will my hon. Friend tell the House how difficult he believes it would have been to sort out the loophole that was being exploited if we had adopted the Liberal Democrat policy of having a Finance Bill every two years instead of every year?

Edward Balls: We would have had a considerably longer period between our decisive decision at the time of the pre-Budget report and the eventual enactment of the Finance Bill provisions, though our decision to act would not have been delayed because at that time the revenue risk was too great.
	I am not going to say that there are no lessons to be learned from the experience. In retrospect, the Government could have been clearer about their intentions and I believe that both the Government and the insurance industry together could learn some lessons about the process involved in tax policy making. Indeed, I spoke earlier today to the director general of the ABI about how to learn such lessons for future tax policy.
	In conclusion, the decision was taken in order to restore the Government's intentions to protect the tax base and to ensure that what we set out to do and what the Finance Bill legislated for—to tax-advantage retirement saving—was, in fact, what happened. It was never our intention to tax-advantage assurance. I do not think that the hon. Member for Fareham is proposing so to do, but if he wants to stump up the £500 million necessary to oppose the clause, I will be very interested to find out how he is going to pay for it.

Question put, That the clause stand part of the Bill:—
	 The Committee divided: Ayes 262, Noes 145.

Question accordingly agreed to.
	 Clause 67 ordered to stand part of the Bill.

Schedule 18
	 — 
	Pensions schemes: abolition of relief for life assurance premium contributions etc

Amendment proposed: No. 6, in page 218, line 34, leave out '6th April' and insert '1st August'.— [Ed Balls.]

Michael Lord: With this it will be convenient to discuss Government amendments Nos. 7 to 9.

Rob Marris: I welcome the transitional dates in the amendments in the name of the Chancellor of the Exchequer. The nationally known firm of independent financial advisers, Torquil Clark, is based in my constituency. Indeed, its office is about 100 m from my office and I know it quite well. In December I met people from that firm to discuss the announcement made in the pre-Budget report on the ending of tax relief on pension term assurance, and one of the things that they were concerned about was the suddenness of the transition. The amendments soften that somewhat, and they are welcome.
	The hon. Member for Ludlow (Mr. Dunne) said that the transitional dates were not revealed until after this year's Budget, and he referred to April, but in fact they were revealed on 21 March, in paragraphs 3 to 5 on page 47 of the Budget notes. I think that the Government are right to close the loophole, and that is why I have just voted in favour of clause 67, which will introduce schedule 18 if we agree to that schedule, as I expect we will. The amendments are helpful, as they set out the dates.
	Government amendment No. 9 includes what I regard as a major drafting error: the sub-paragraph that it inserts starts with the word "But", and it should not do so. I hope that on Report, the Government will remove the word. In addition, in the third line of the amendment, the verb "was" is used, but I think that the verb is conditional and should take the subjunctive form. It should therefore be "were", not "was", and I hope that the Government will look at that on Report. However, I welcome the amendments.

Edward Balls: I am grateful for my hon. Friend's contribution, which was detailed, incisive and informed, as always. As usual, he draws from the detail to make a wider point about the future direction of the country. On clause 67, I am grateful for his support for the intention behind the legislation. As he said, we consulted the industry in detail immediately after the pre-Budget report to make sure that we got the transitional arrangements right. It was put to me in our previous debate that the Government were slow in coming up with transitional arrangements; it was said that we did not do so until April. In fact, we had already come up with transitional pipeline arrangements, but the Association of British Insurers told us in April that some policies risked not getting the proper treatment because insurers had taken longer to process claims than they and the ABI had previously expected. That is why the amendments prolong the transitional period. I will reflect on the language issue; I will have to take advice on my hon. Friend's question about the word "But"—[Hon. Members: "Why?"] Because I do not know the answer.

John Redwood: Just to add to the Minister's confusion, I suggest that he look at the numbering, too, as the amendments will result in sub-paragraph (5A) coming after a (5)(b) and conflicting with another (5)(a).

Edward Balls: I will reflect on all those points. Obviously, it is important to ensure that we get our As before our Bs, and that we use "but" correctly in this important legislation—which, as I said, will save £500 million over five years. However, Opposition Members have just voted against part of the legislation. I do not know where the shadow Chief Secretary to the Treasury or the shadow Chancellor were when that decision was made. We look forward to finding out where the shadow Chief Secretary will find the £500 million that she will need to pay for that decision. I fear that the right hon. Member for Wokingham (Mr. Redwood) will have to find further public spending cuts to make in his tax policy commission report, which we look forward to with avid interest, as he will not only have to fund his proposed tax cuts, but pay for a £500 million tax concession. We look forward to seeing those details, and I will reflect on the detail of the points raised. With that, I am happy to commend the amendments.
	 Amendment agreed to.
	 Amendments made: No. 7, in page 218, line 40, leave out 'on or before 13th December 2006' and insert 'before the appropriate date'.
	No. 8, in page 219, line 3, at end insert—
	'(4A) In sub-paragraph (4)(d) "the appropriate date" means—
	(a) 13th April 2007 (in any case where, on the day of the making of the insurances in respect of which the policy of insurance was issued, the rights of the individual under the pension scheme included an actual or prospective entitlement to a pension), and
	(b) 14th December 2006 (in any other case).'.
	No. 9, in page 219, line 7, at end insert—
	'(5A) But where, on the day of the variation, the rights of the individual under the pension scheme included an actual or prospective entitlement to a pension, a relevant event does not occur by virtue of the variation if it was made in pursuance of a proposal made in writing (by whatever means) and received by or on behalf of the insurer before 13th April 2007.'.— [Ed Balls.]
	 Question proposed, That this schedule, as amended, be the Eighteenth schedule to the Bill.

Edward Balls: I want to pick up on a point made earlier about the use of the reserve powers to make regulations in the schedule. That is a complex subject. The Committee is in agreement—or at least, Labour Members are—on the intention behind the Bill but we want to make sure that future changes do not inadvertently lead to problems, and that is why we will not hesitate to use the secondary powers. The hon. Member for Buckingham (John Bercow) expressed concerns, but if there is any question of those secondary, negative resolution powers being used, I will make sure that I, or my successors, inform Opposition Members in writing of our intention to use the powers in plenty of time, so that we can ensure full consultation and consideration of the matter, both in the House and outside. With that, I hope that we can agree to schedule 18.

Rob Marris: I bear in mind the fact that we are in Committee, so I wish to make some more drafting suggestions to my hon. Friend the Economic Secretary. First, with the greatest respect to the right hon. Member for Wokingham (Mr. Redwood), he is wrong about what is now sub-paragraph (5A) of the schedule, as amended. If he looks at line 22 on page 218 of the Bill, he will see a reference to "paragraph 5", which is not bracketed. If he then looks at line 7 of page 219, where sub-paragraph (5A) has been inserted by amendment No. 9, he will see that it follows sub-paragraph (5), and that is in brackets. He has miscounted, but he is right to be wary of the wording of the Bill. I suggest to my hon. Friend the Economic Secretary that the parliamentary drafting should not refer to "premiums" but to "premia". "Premiums" occurs in lines 17, 20, 24, 28, 30, 31 and 39 of page 217 and in lines 2 and 20 of page 218.
	My hon. Friend said that he would kindly look at the use of the word "But", and that anathema and grammatical error also occurs in line 32 on page 217, in line 19 on page 218, and in line 20 on page 219. I urge the Treasury to have a word with its parliamentary draftspeople about the way in which the grammar of our language is used; after all, we are talking about statute.

Nicholas Winterton: Give him a job!

Edward Balls: The hon. Gentleman shouts that we should give my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) a job. I will reflect on the points raised. I do not want to get into the issue too deeply, but I am happy to consult Fowler's "Dictionary of Modern English Usage" on the matters that have been mentioned. I do not know about the use of the words "premiums" and "premia", but I know that Fowler allows people to go either way on the question of split infinitives, depending on their predisposition, and it may be that Fowler will tell us that some discretion is allowed on that point. However, I hesitate to dwell on those issues too long. Remembering last year's Finance Bill, all I can say is that it was not our intention to make such mistakes. I await the Committee stage to find out the views of Mrs. Gauke on these matters.
	 Question put and agreed to.
	 Schedule 18, as amended, agreed to.

Clause 12
	 — 
	Rates of air passenger duty

Christopher Chope: I beg to move amendment No. 3, in page 8, line 22, leave out '1st February' and insert '21st March'.

Sylvia Heal: With this it will be convenient to discuss the following amendments:
	No. 4, in page 8, line 23, leave out subsection (5).
	No. 5, in page 8, line 27, leave out subsection (6).

Christopher Chope: Amendments Nos. 4 and 5 are consequential on amendment No. 3, because if the retrospective element is removed by amendment No. 3, the need for the remainder of the clause will be removed.
	Today is the 10th anniversary of the winning back of the Christchurch constituency from the Liberal Democrats. I do not know whether it is a delightful irony or generosity of spirit that has resulted in the Liberal Democrat Front-Bench team supporting the amendment in my name today. It may indeed be both. I applaud the fact that the Liberal Democrats are prepared to come into the Lobby to support those of us who are concerned about the principle of retrospective taxation.
	I have raised this matter on a number of occasions in the House. The first time was on 31 January on a point of order, on the eve of the implementation of the increase in taxes. As a result of Mr. Speaker's statement then, I applied for an Adjournment debate, which took place on 20 February. During the debate the Financial Secretary said that I would be able to return to the subject during the Budget debate and the Committee stage of the Finance Bill. He is right. I have taken up those opportunities, because we still do not seem to have persuaded the Government that they are doing the wrong thing by imposing retrospective taxation. That is why I hope the amendment will be supported this evening.
	That has been the view of all my right hon. and hon. Friends, and we have been involved in sending standard letters to our constituents, drafted with the support of our Front-Bench team. Those standard letters included the following words:
	"I do share your concerns about the implementation of the Chancellor's APD increases, particularly the retrospective aspect. I know that many individuals and companies have been hit by the increased duty being levied on holidays that were booked before the Chancellor's announcement."—
	holidays that were not only booked but paid for before the Chancellor's announcement—
	"It seems clear to me that Gordon Brown did not properly think through the consequences of this bungled raid on the travel industry. Indeed, a legal opinion received by the Conservatives suggests that the Chancellor's actions may even be illegal as it has not been approved by Parliament."
	I am informed that in the judicial review that has been initiated, the Government have until the end of this week to submit their response to that claim, and that it is likely to be heard before the end of July. So it was not an idle threat that their illegal act would be challenged. This is being followed up, no doubt at considerable expense, by the travel companies, which are especially outraged by what has happened.
	It is a long-standing convention of the House that Budget resolutions are not retrospective. That is why the amendment is designed to change the starting date for the air passenger duty increase from 1 February to 21 March—a seven-week deferral. The reason I chose 21 March is that that was the date of the Budget. There was a Budget resolution on the matter, but prior to that there had been no opportunity for any Member of the House to vote on the increase in taxation. We now have the opportunity to vote on it again.
	During the vote on Budget resolutions, six of my right hon. Friends and 14 of my hon. Friends voted against motion 13 because we were concerned about the retrospective nature of the matter and because we regarded it as a constitutional outrage. I know that some of my right hon. and hon. Friends were concerned that to vote against the whole motion was going too far. That is why the amendment focuses much more narrowly on the issue of retrospection, and simply changes the date by seven weeks.

David Wilshire: Can my hon. Friend confirm that the amendments before us leave behind the generality of the debate? This is no longer a debate about air passenger duty itself. It is not about whether this is a permanent tax. It is about a one-off arrangement. It is focused narrowly on the abomination of imposing a tax before the Government have the authority of Parliament to do so.

Christopher Chope: My hon. Friend is right. I know that he would have been in the Lobby with us on 27 March had he been in the country, but he was away on overseas parliamentary business at that time. The amendment has been drafted so that it deals with the one-off period of seven weeks. It reflects the concerns shared by my right hon. Friend the Leader of the Opposition and my hon. Friend the shadow Chancellor of the Exchequer.
	It may be immodest to recall that shortly after 31 January, when I raised my original point of order about the retrospective nature of the measure, I was having a sandwich lunch with my right hon. Friend the Leader of the Opposition, who congratulated me on the points that I had made and said that he very much shared my concern about the retrospective nature of the air passenger duty increase set out in the pre-Budget report and confirmed in the Bill.
	I know that some of my colleagues are still worried about the cost of delaying the increase by seven weeks. It is a large cost in layman's terms—about £100 million. That is an indication of the extent of this stealth tax introduced by the Chancellor of the Exchequer—a yield of about £100 million in seven weeks. Some of my colleagues are sensitive about supporting an amendment that could be misrepresented by the Government, who might say that we have a black hole in our calculations, and ask how we will manage to balance the books when we get into government if we have voted against the retrospective nature of the air passenger duty increase.

David Wilshire: Can my hon. Friend confirm that my memory is correct—that when the extra tax was put on, we were told that it was nothing to do with general taxation or a black hole if it were not introduced? It was all to do with special measures that would be introduced in the future, which our amendment would simply delay by seven weeks.

Christopher Chope: My hon. Friend is right. We are talking about a seven-week delay. Once the measure is introduced it will continue for ever and a day, unless or until it is changed. I am sure that on clause stand part, and perhaps on the next set of amendments, we will have a chance to consider whether air passenger duty can properly be regarded as a green tax.
	Let us put the £100 million cost of my amendment into context. It represents less than 0.02 per cent. of total annual public expenditure. That is £2 in every £10,000. Most people believe that about 40 per cent. of the money raised in taxes is wasted by the Government. As an Opposition, we are in the business of saying that we could save 0.02 per cent. of public expenditure in a year without any problems at all. Another way of looking at it would be to say that that £100 million is only 1 per cent. of the money being wasted on the new NHS computer system. We are not talking about an enormous black hole that the Government can use to intimidate us into not voting against retrospective taxation.

Julia Goldsworthy: If somebody bought a ticket before 6 December, when the announcement was made, and was travelling after 21 March, the date that the amendment suggests, would they not still be caught by the retrospective changes to the tax system?

Christopher Chope: The hon. Lady is right; the amendment is limited. I considered tabling another amendment stating that clause 12 should not apply in respect of anybody who paid for and ordered their tickets before 6 December. She has referred to another mischief, which is one of the reasons a number of us are concerned about clause 12 in general. In a sense, that is a separate argument. It is a strand of the same retrospection issue, but speaking in strict parliamentary terms, I am talking about not increasing taxes on people in this country without allowing Parliament to vote on those increases.
	Although the Government say that they have only one Budget a year, they are using the pre-Budget report as an opportunity to announce tax increases—in this case, a tax increase of £1 billion a year—so the Chancellor can come along on Budget day and say, "This is a neutral Budget." That is exactly what he did this time, having conveniently forgotten that he had already announced a £1 billion tax increase in his pre-Budget report, for which he had not legislated or obtained parliamentary approval. The issue is important, and I am glad that there is concern among Conservative Front Benchers and in the wider House about retrospection.
	I want briefly to examine the idea that the tax is somehow justifiable because it is "green" or "environmental". I will not get into what I think is partly a semantic debate about whether this is a proper environmental tax—although in my view it is not. Even if it were an environmental tax, Conservative party policy, which has been announced by my hon. Friend the shadow Chancellor, is that we support green taxes, but only if they are offset by reductions in taxes elsewhere. The shadow Chancellor put it this way when he addressed the issue in an interview in "The World at One" on 1 February, following my point of order on the previous day:
	"I think there is a case for green taxes and bringing in an aviation tax but they should be replacement taxes".
	That is not consistent with saying, "We can't vote against any tax increases proposed by this Government." We have said, as a matter of policy, that we will vote against tax increases, and particularly those that purport to be green tax increases, unless they are accompanied by offsetting reductions in tax.
	The amendment is modest, and it does not go as far as some would wish, but it states the important principle, which we should stick to through thick and thin in this House, that we should not introduce retrospective taxation.

Helen Goodman: I oppose the amendment—and will vote against it if the hon. Member for Christchurch (Mr. Chope) presses it—for seven reasons.
	First, the position adopted by Opposition Members—this particularly applies to the Liberal Democrats—is Augustinian. They want to be good, but not yet, so they will take any opportunity to push back the increase in tax. Secondly, the tax cannot be described as truly retrospective, when people had more than two months' notice of the increase. Retrospection surely means increasing tax on things that people have already done. Thirdly, the practice adopted is not significantly different from the traditional practice with excise duties.

Paul Goodman: Why does the hon. Lady think that the last time the Government substantially raised APD, they gave a year's notice of the rise?

Helen Goodman: I have no idea. I did not know that the Government gave a year's notice last time. It was obviously not for the reason suggested by the hon. Member for Christchurch, because it would not take a year to go through the process that he is calling for.

John Redwood: Would the hon. Lady think it fair if the Government suddenly said that all the things that she had paid for over the past month would attract a special tax, which she had to pay although it had not been ratified by this House?

Helen Goodman: The right hon. Gentleman's point is not significantly different from all sorts of taxes that we must pay. For example, the same applies to council tax—when the local council issues a bill, one does not have time to move house.

Several hon. Members: rose —

Helen Goodman: I will not give way, because some of the points being made by Opposition Members are wholly ridiculous.
	Fourthly, Conservative Members have clearly forgotten the action that they took in February 1985, when they changed the tax treatment of gilts. When the decision was taken, the Bank of England said that it could not possibly trade in the gilts market if it knew that that tax change was forthcoming, so it could not possibly wait until the Budget. A press notice was issued at 7 o'clock in the morning, before the gilts market opened, so there were certainly no Budget resolutions on that occasion.

Stewart Hosie: Trading in gilts is market-sensitive, whereas the introduction of a retrospective tax is not. The hon. Lady's fourth argument does not hold very much water.

Helen Goodman: No, the hon. Gentleman is wrong. Either the principle is important or it is not. Tory Members who support the amendment have clearly forgotten that they used precisely the same procedure in February 1985.

Julia Goldsworthy: Returning to the hon. Lady's third argument, she mentioned council tax. An analogous example would be if someone were issued with a council tax bill, which they paid, but was then asked to pay more on top of it.

Helen Goodman: Fifthly, another key point is the behaviour of the airlines. The airlines frequently add charges, such as fuel surcharges and changes in airport taxes, after people have bought their tickets. They have protested about this measure, but their position is weak.
	Sixthly, 1 February is an extremely sensible choice of date, because that is the point in the year when the fewest people are flying, which means that the fewest people will be inconvenienced. My final reason is that airlines frequently put on other charges after people have taken such decisions.

Vincent Cable: I wish to support the amendment. The hon. Member for Christchurch (Mr. Chope) was surprised that people might wish to support it on its merits rather than on the basis of their political alignments, but it seems perfectly sensible and I am happy to do so.
	The hon. Member for Christchurch argued for the amendment primarily in terms of the principle of retrospectivity. It is fair to say that there is not a basic theology about retrospective taxation, which has happened in the past. Indeed, when my hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy) wrote to the Economic Secretary to ask him for examples, he came up with several, but they related primarily to anti-avoidance measures. Nobody would remotely suggest that the people turning up at an airport and being asked to pay a levy on their tickets are in any sense involved in tax avoidance. That is a completely different concept; the right hon. Member for Wokingham (Mr. Redwood) made the distinction earlier.
	Two groups of people will be disadvantaged. The first comprises travellers who bought their tickets before 6 September without any awareness that this was going to happen and will travel after 1 February. There are many people in that category. They are not business travellers, who normally buy tickets fairly close to the point of departure, but people planning a family holiday, probably with a substantial cost involved. The other group comprises travel agents who have decided to carry the cost themselves because they have no alternative, or to avoid alienating their customers. Several travel agents have made that point to me.

David Taylor: Is the hon. Gentleman suggesting that those who purchase, long in advance, services or goods that they do not use or take possession of should always be able to avoid any increases in taxation on that good or service in the meantime, no matter how long a period is involved? That is the logic of his argument, is it not?

Vincent Cable: Of course, these are tickets that have been paid for in good faith. As I understand it, the purpose of this tax measure was to change people's behaviour, but it is now being applied to decisions that have already been made. There is a basic lack of logic in the Government's proposals.
	The hon. Member for Bishop Auckland (Helen Goodman) made the reasonable point that a lot of money is at stake—£100 million or something of that order. Those who oppose the measure—Opposition parties, rebels or whoever—will be challenged on how they would fund the deficit. I do not have much of a problem with that, because our approach to aviation taxation is not that it should be tax-neutral. We believe—I do not know whether the hon. Member for Christchurch shares this view—that aviation taxation should be quite a lot higher to capture all the environmental externalities involved, and we have set out the case for that. Our proposals would raise substantially more revenue than the Government's proposals, not less.
	The amendment involves an important issue of principle that has been well expressed, and we are happy to support it.

Quentin Davies: I congratulate my hon. Friend the Member for Christchurch (Mr. Chope) on his principled approach to this difficult question, on the single-mindedness with which he has pursued his campaign for several months, and on his efforts throughout that time to draw to the attention of his colleagues in all parts of the House the importance of this issue.
	The hon. Member for Bishop Auckland (Helen Goodman) is a distinguished Member of the House to whom I always listen with pleasure, but it did not sound as though she understood the concept of retrospectivity. She cited in defence of the Government's proposals an occasion in 1985 of which I have no memory—although I do not dispute that it may have occurred in the way she describes—in which the Treasury announced at 7 o'clock in the morning that a new tax would apply thenceforth. That is not retrospectivity, because all the trades done after the market opened at 7 o'clock in the morning would be done in knowledge that a new tax then applied.
	Retrospectivity is a very serious matter, and it is incorporated in a glaring or, I might say, an egregious fashion in the Government's proposals. It occurs when a transaction is concluded between two or more citizens who believe that no tax applies, or a certain type of tax applies, and then find afterwards that a new tax is levied on them. It is exactly as if I had agreed today with the Financial Secretary to buy his tie for—what would it be worth? I suppose £5 or so— [ Interruption . ] No, that is unkind—I will make it £10 or so. I am not actually making him an offer, in case he is getting excited. It is as if I concluded with him today that I was going to buy his tie for £10, gave him the £10 and received the tie or was promised its delivery, and then we were suddenly told the next day, the next week, the next month or six months later that a new stamp duty or purchase tax was being imposed on ties and I had to come up with another £500 to give to the Treasury for having concluded the transaction with him some time before. That would be retrospectivity. I can see from the reaction on both sides of the House that we all think that that is a completely fantastical situation which, if it arose, would be utterly intolerable and unacceptable. However, it is precisely the situation that we face.

David Taylor: The hon. Gentleman makes my earlier point precisely. In his example, he takes possession of this hypothetical tie and would rightly feel aggrieved if there was a retrospective tax thereon. However, in the case of air passenger duty we are talking about advance payments for services—in this case, flights—that are not consumed at the point at which the tax bites. That is not retrospectivity.

Quentin Davies: It is indeed retrospectivity. The issue is whether the tax is known to apply by the parties involved when the transaction is concluded.

Helen Goodman: rose—

Quentin Davies: Of course I will give way to the hon. Lady in a moment if she will be kind enough to let me respond to her colleague.
	This is a matter of justice. It is also a matter of economic risks. The great question is whether we have a country—a free country, I hope, in our case—and an economy in which people can conclude transactions knowing what the tax regime is at the time that they do so. It is enormously important for the economy, and for justice, that that should be the case. If there is any retrospectivity, neither of those conditions applies. When the transaction takes place, the parties involved need to know what are the costs, risks and benefits to all concerned. If the Government subsequently, in a way that those parties could not have anticipated, change the rules of the game—the costs, risks or benefits emerging from the transaction—they have acted retrospectively. That is unjustified morally and extremely dangerous economically.

Helen Goodman: The hon. Member for Christchurch placed emphasis on whether the Budget resolutions had been passed—I took that to be the thrust of his argument—but the hon. Gentleman seems to be arguing a completely different case and to think that that is not at all relevant.

Quentin Davies: It is a curious way to conduct a debate to try to refute an argument by saying that it is different from what was said by another person who took the same line but used different arguments in support of the same cause. That may well be the case, but I take my stand on the matter of retrospectivity. Such an important principle is at stake here that I will vote to defend it whether or not I am joined by the majority of my colleagues. We have heard some other good arguments. For example, the hon. Member for Twickenham (Dr. Cable) made some points of a practical character that tend in the same direction. The fact that there are other arguments from different sources that tend in the same direction hardly undermines my argument, which is based on the principle of retrospectivity.

Julia Goldsworthy: The hon. Member for North-West Leicestershire (David Taylor) said that the point of consumption was the most important. However, if one buys a bottle of whisky before a Budget that increases duties on whisky, but does not open it until afterwards, one is not expected to pay an additional charge.

Quentin Davies: The hon. Lady is right and I thank her for that additional argument, which reinforces my case, as it was intended to do. The important point is the conditions that apply when the transaction is made. Transactions are irrevocable—one buys or one sells and, at that point, one must make a definitive calculation of the costs and gains. I repeat myself because I believe that the hon. Member for Bishop Auckland has some difficulty in grasping the notion of retrospectivity. If conditions are subsequently changed by a Government tax decision, which applies to the transaction, even though at the time no one could know that the change would occur, retrospectivity has clearly taken place.
	If we vote for the amendment—and one never knows in a democratic Parliament how many colleagues will go through the same Lobby—we must act responsibly and accept that the consequence of voting for something is that it may pass into law. I recognise that, if that happens, the Government will lose revenue. I have not made the calculation but I take on board the figure of £100 million or £120 million, which is not insubstantial. I am always careful about voting for a measure that will cost the taxpayer £100 million to £120 million. Perhaps the phrase "cost the taxpayer" is a little unfair because the taxpayer had no more idea than anybody else that the Government were proposing the measure.
	In every society that operates under the rule of law and in a market economy that is run on sound principles, the principle that there should be no retrospectivity is so important that establishing it is worth £100 million or £120 million. If the Government are defeated, that will convey a signal to them and subsequent Governments, who may be tempted by retrospectivity, that it is expensive because the House of Commons may rightly take a principled stand. Our predecessors for generations and centuries have upheld the principle that the House should not legislate retrospectively, whether for tax law or other laws. I leave aside the special circumstances of tax avoidance schemes.
	We in our generation should uphold the principle that I have outlined. If the cost of doing that in the current circumstances is £100 million or thereabouts, I fear that it must be borne in the higher and longer-term national interest.

Rob Marris: We are debating two principles this evening. First, the hon. Member for Christchurch (Mr. Chope) raised what might be called the constitutional principle. I understand that and I will be interested in the Government's response.
	Secondly, we are considering retrospection. I understand the principle that the hon. Member for Grantham and Stamford (Mr. Davies) enunciated. However, he has got it round his neck when he tried to give practical examples. That also applies to the hon. Member for Falmouth and Camborne (Julia Goldsworthy), with her ridiculous argument about consuming a bottle of whisky. They both fail to differentiate the purchase of a physical artefact—whether a tie, a bottle of whisky or a car—and the delivery of a service.
	For example, if the hon. Member for Grantham and Stamford looks back, he will realise that, when the Conservative Government, contrary to their electoral promises, raised the VAT rate markedly, that higher rate covered services, which were delivered after the change in the VAT rate, even though the agreement for providing them was made before the increase.

Quentin Davies: The hon. Gentleman used the word "principle". I hope that he agrees that a good principle remains good even if someone in the past has breached it. If some past Government or Government of a different complexion have breached it, that in no way negates or reduces its importance. Surely he does not seriously suggest that different tax rules—in the case that we are discussing, different rules relating to retrospectivity—should apply to goods and to services. He has a background in economics and he knows that there is no foundation for such a distinction in the science of economics.

Rob Marris: Perhaps I am not making myself clear. I understand the principle that the hon. Gentleman outlines. I am trying to explain that there is no retrospectivity in air passenger duty. I understand the constitutional point—we will consider that shortly and the Financial Secretary will tackle it—but there is no retrospection in air passenger duty.
	Although I have an A-level in economics, my background is in being a lawyer. I therefore know something about contracts. The tax is not to do with when the contract is made but, in the case of a service, which often entails delay, when the transaction is concluded through the delivery of the service. The example that the hon. Gentleman gave of the tie was a concluded deal and ownership had passed before the tax change had occurred.

Quentin Davies: The important point about air passenger duty is that the economics of the transaction will be changed subsequently. I am sure that the hon. Gentleman agrees that any transaction is based on a balance of cost and gain. Each party has costs and gains. In the example that I cited, the Financial Secretary lost his tie and gained some money. If the state subsequently changes the economics of a transaction, the equation would be different and one or other party to it would probably not have undertaken it if he or she had known what was coming. That is the essence of retrospectivity and the hon. Gentleman cannot deny that that is the result of the Government's actions in the matter that we are discussing.

Rob Marris: The hon. Gentleman says that I cannot deny it but I do.

Julia Goldsworthy: As my pocket money probably would not have stretched to procuring any services when the change in VAT to which the hon. Gentleman referred was made, will he clarify whether people were liable for the increase regardless of whether they had paid for the services and of whether the contract to provide them had been agreed?

Rob Marris: It happened when the service was performed. For example, if one engages a VAT-registered garden company and the VAT rate changes before the garden is done up, the higher rate has to be paid. It is not simply a matter of goods and services. The nature of the purchase of goods often means that ownership changes instantly whereas delivery of a service can be delayed.

John Healey: My hon. Friend is making a typically well argued case. Does he agree that the point at issue, which is causing some confusion, is that the tax point in air passenger duty is that of departure, not of purchase?

Rob Marris: My hon. Friend is as perspicacious as ever. If a service has been bought in October 2006 but is performed by an aircraft company in April 2007, there is a duty on departure when the service is performed—when the aircraft takes off with a passenger in it. There is therefore no retrospectivity in the provision.

David Gauke: I was merely going to intervene on the hon. Member for Wolverhampton, South-West (Rob Marris). I thought that his VAT example was good, but as his argument developed it became clear that it was not. Value added tax is payable when the service is paid for, and if that happens before the increase in the rate, no further payment is necessary. That is the difference between VAT and air passenger duty, for which, as the Financial Secretary said, the tax point is later. I simply wanted to make the point that VAT is not an adequate example and that the Government experience great difficulty in providing examples of similar retrospective legislation—

The First Deputy Chairman: Order. May I clarify whether the hon. Gentleman is making an intervention or a speech?

Rob Marris: I had finished speaking.

The First Deputy Chairman: The hon. Member for South-West Hertfordshire (Mr. Gauke) is therefore making a speech.

David Gauke: I am grateful for your clarification, Mrs. Heal, of exactly what I am doing— [ Interruption. ] And I thank the hon. Member for South-East Cornwall (Mr. Breed) for his retrospective clarification.
	The difficulty for the Government is that the examples that they have produced generally relate to cases of a market-sensitive nature, such as the example given by the hon. Member for Bishop Auckland (Helen Goodman). No doubt we shall hear other examples from the Minister later in which there has been a delay before parliamentary ratification, perhaps because of a general election, for example.
	As I am now making a brief speech, I will ask the Financial Secretary to clarify one point. I remember that, immediately after the pre-Budget report, there were strong rumours floating around that the Chancellor had received strong advice from Treasury officials that this rise in air passenger duty could be attacked and that it might be illegal. It was also rumoured that the Chancellor had been advised to delay its implementation until after the Budget in March. No doubt there will at some point be a freedom of information request from  The Times seeking details of the advice that the Chancellor received, but I should be grateful if we could short-cut the process so that we do not have to wait two or three years for the answer. Will the Financial Secretary confirm or deny that the Chancellor received strong advice that this retrospective legislation could prove vulnerable in the courts?

John Redwood: We are hearing the most extraordinarily convoluted legal arguments from the Government about why this measure is not retrospective, and why it is a good thing that people will have to pay this tax in spite of having paid for their tickets in advance of its imposition. Perhaps the House should think about the underlying realities of the people for whom we are legislating today. We know that it is the Government's policy that only the rich should travel. Clause 12 is part of their policy that those on low incomes should be priced out of travelling by air. That is the purpose of the duty. Clearly it will not price the rich people on expense accounts at the front end of the aircraft out of travelling; it will price the poor out.

Helen Goodman: indicated dissent.

John Redwood: I see the hon. Lady disagreeing with me, but she should recognise that her Government wish to reduce the number of people travelling by air by taxing them, and that it will be the poor, not the rich, who get thrown out.

Helen Goodman: Surely the right hon. Gentleman can understand that the people in the top 25 per cent. of the income distribution take on average six return flights a year and that the people in the bottom 25 per cent. take on average one such flight a year. The benefit to the environment would be secured if those people on high incomes who take six flights reduced the number to, say, four. This would not reduce the opportunity for the rest of the population to go on their summer holiday.

John Redwood: The Conservative party is holding a consultation on this sensitive issue. One of the questions in the consultation asks whether there is a way of imposing taxes on air travel that would be less penal for those on low incomes, and that would get away from the obvious obstacle in clause 12. Perhaps even worse than the underlying reality of clause 12—which is its aim of taxing the poor out of planes—is that, although those people on low incomes have already bought their tickets and carefully calculated their family budgets, perhaps for a once-in-a-lifetime trip that they could not normally afford in other circumstances, the Government have suddenly come along and said, "We have bad news for you. All your family members have to pay this extra air passenger duty." The fact that those people have already paid for their tickets and that that is a done deal has no impact on the Government; they are stony-hearted men and women, and they are going to impose the tax anyway.
	I will be guided by my hon. Friends on the Front Bench, and I suspect that they will suggest that we let the Government get on with this, because the reality is that I do not think that my hon. Friend the Member for Christchurch (Mr. Chope) has enough people crowding around the Chamber to defeat the Government on this measure. Either the Government must change their hard heart, and their mind, and find another way to raise this £100 million, or those people will be badly damaged. I shall give the Government some free advice, as I often do. They could make themselves considerably more popular on the eve of the local elections if they cancelled this tax on people travelling around and paid for it by cancelling the identity card scheme. Indeed, if they did that, we would be able to have other tax reductions as well—

The First Deputy Chairman: Order. We are not discussing the identity card scheme this evening.

John Redwood: I accept your advice, Mrs. Heal. I was illustrating that there are other ways of finding £100 million, and a lot more besides. We are discussing whether £100 million is absolutely essential to the future of the Government, and I was making the point that there are many popular ways for them to show that that £100 million is not essential to them.
	My hon. Friends on the Front Bench are probably worried, because they have seen what the Government can do, about what would happen were they to recommend that we vote against the measure. It would be scored as £100 million that the Conservatives would not have when they come to power. The reality is completely different, however. We all know that the Government are going to take this £100 million tonight, and many more hundreds of millions of pounds through this tax in the run-up to the next general election.
	Any sensible Government would accept the Opposition's position, which is that, in due course, nearer to the election, we will set out our tax proposals for a future Conservative Budget, but I hope that that will not get in the way of our vigorously opposing measures such as these, which are mean-minded and unpleasant. I hope that the Minister will think again, but I am sure that he is not going to. He obviously believes in retrospectively taxing the poor.

Brooks Newmark: Thank you for calling me to speak, Mrs. Heal, and I appreciate the ongoing guidance that I have received from you. I have four brief points to make on amendment No. 3 and the deferral of the air passenger duty increase. I use the term "increase" advisedly because, in respect of economy fares, the Chancellor has merely undone his own handiwork.
	First, I want to make it clear that air passenger duty has nothing whatever to do with forestalling. I do not want to get too bogged down in procedural intricacies and precedents, but the precedent laid down by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) when he originally introduced air passenger duty was to give the industry several months in which to adapt to the duty and to any subsequent rises. As I understand it, however—perhaps my hon. Friend the Member for Christchurch (Mr. Chope) will correct me if I am wrong—amendment No. 3 seeks partly to preserve that precedent which, until the Chancellor scrapped it, helped to prevent a good deal of unnecessary confusion to airlines, tour operators and passengers alike.
	My second point is that air passenger duty is not at risk of forestalling precisely because it does not really help to effect behavioural change. APD was introduced on a clear pretext: to raise revenue from an under-taxed industry. The reason for the curious timing of the APD increase that appeared in the pre-Budget report was equally clear: it was to raise £100 million of additional revenue. That was certainly the view of Robert Chote of the Institute for Fiscal Studies when he gave evidence to the Treasury Committee. He said:
	"The fact that the Chancellor is in a tight position I think is clear...from the fact that he did not offset the rise in green taxation with a cut in other taxation, as he might have found appealing given the political debate".
	Martin Weale, also giving evidence, told me personally that APD
	"is very much at the level where it is just an additional tax rather than really going at changing behaviour."
	Likewise, the Institute of Chartered Accountants was of the opinion that APD did not demonstrably change behaviour.
	It took another three and a half months for the Treasury to concoct an explanation. When Mark Neale from the Treasury gave evidence on the Budget, he suddenly told me that
	"the APD change came in quickly because there were pressing environmental reasons for bringing that change in quickly."
	I will not try to guess what those pressing environmental reasons were, but it remains my opinion that there were pressing economic reasons to grab the £100 million on offer from seven extra weeks of increased yield. What we need from the Chancellor now and in the future is a much clearer differentiation between taxation to change behaviour and taxation simply to raise revenue.
	My third point concerns the anomaly that tour operators have faced regarding their ability to pass on the cost of increases to their customers, to which the hon. Member for Falmouth and Camborne (Julia Goldsworthy) referred earlier. I know that the matter is, embarrassingly, sub judice, and that the Financial Secretary gave some reassurance in February that he would have the Department of Trade and Industry consider reviewing the guidelines.

Christopher Chope: Has my hon. Friend seen that a consultation paper has been published today in relation to reviewing the guidelines? Having looked at that consultation paper, however, I can say that any expectations that he had that the problem would be solved will be dashed.

Brooks Newmark: My hon. Friend beats me to my peroration, which, sadly, I will now have to leave aside.
	I want to address, however, the damage that has been done to the reputation of environmental taxation by this debacle. The Treasury claimed that APD would save 1.1 million tonnes of CO2 annually, but it is left to the Environmental Audit Committee to remind us that that is a cut in projected growth, not a cut in absolute terms.

John Healey: The Treasury has at no stage said that the APD change will lead to a saving of 1.1 million tonnes of carbon each year. Its direct impact will be to save 0.3 million tonnes of carbon a year, as I and the Treasury have consistently made clear. Given the savings on other greenhouse gas-causing emissions, which are not CO2, its overall impact will be to save about 750,000 tonnes of carbon a year by 2010. I hope that that helps that hon. Gentleman, and does not damage his case too much.

Brooks Newmark: No, it does not damage the case. I appreciate the clarification, but it does not detract from my point that APD is effectively a blunt instrument to deal with the amount of CO2 being chucked out into the air.

John Gummer: Does my hon. Friend agree that were the proposal a green tax, no more would be paid for a full aeroplane than for an empty aeroplane? It is a simple fact—

The First Deputy Chairman: Order. I am afraid that that intervention is not relevant to the debate.

Brooks Newmark: I appreciate that guidance, Mrs. Heal, but I do concur with my right hon. Friend.
	There is a legal challenge against APD on the grounds that it is not a proper environmental tax, with the result that the entire industry is feeling less inclined to be co-operative with the Government. There is a growing sense among the general public that APD—

The First Deputy Chairman: Order. May I remind the hon. Gentleman of the amendment under discussion, which is not about environmental taxation? His remarks might be more suited to the clause stand part debate.

Brooks Newmark: Again, I appreciate your guidance, Mrs. Heal, but my remarks were a precursor to my final point.
	Lastly, there seems to be no intention that APD revenue, especially the extra £100 million stealthily—or perhaps not so stealthily—taken from airline passengers should be hypothecated to investment in the environment, such as building more flood defences.

Edward Leigh: To be entirely in order, the debate should be about the implementation date. The Minister has made an intervention, however, giving an estimate of the amount of carbon emissions that would be saved. Will my hon. Friend tell us what proportion of worldwide carbon emissions from aviation will be saved by varying the implementation date? I suspect that it would be infinitesimal.

The First Deputy Chairman: Order. May I point out to the hon. Gentleman that the decision as to what is in order is entirely a matter for the Chair?

Brooks Newmark: Thank you, Mrs. Heal.
	As I was saying, the £100 million retrospective tax would be most beneficial if it could be hypothecated to building such things as more flood defences, which would be most welcome in my constituency, especially in the north end at Three Fields, in the south near the village of Coggeshall, and particularly in my own village of Bradwell.

Paul Goodman: You are policing the conduct of the debate as vigorously as ever, Mrs. Heal, which is entirely appropriate. Let me reassure you that I do not propose to be dragged away from considering the amendments of my hon. Friend the Member for Christchurch (Mr. Chope), either by the general debate about the clause or by the Liberal Democrat amendments, which we will deal with in due course. During the opening debate, I will confine my remarks to the amendments tabled by my hon. Friend.
	I think that the record will reflect that, essentially, the hon. Member for Bishop Auckland (Helen Goodman) said that my hon. Friend was looking around for reasons to oppose the APD rise and had picked on the issue of retrospectivity as a kind of fig leaf. That is unfair to him: he has obtained an Adjournment debate on the subject, has campaigned persistently on the issue—I have had dealings with him on it—and takes the constitutional aspects of the business extremely seriously. Therefore, I had better have my wits about me in dealing with his amendments.
	Although Conservative Front-Bench believe that the retrospective nature of the rise is dubious at least, are sympathetic to the intention behind the amendments tabled by my hon. Friend and fully share his concern about the principles of retrospectivity involved, we part company with him to some degree on the likely effect of the amendments if implemented, and cannot support them if he presses them to a vote. I hope to have something reassuring to say to him later, but in the meantime I shall examine in detail the points about retrospection.
	As the hon. Member for Twickenham (Dr. Cable) said, these matters involve a certain amount of theology, and the whole question of whether the Chancellor, Treasury and Financial Secretary have acted retrospectively in relation to the clause has been closely considered, not least by the Treasury Committee, of which my hon. Friends the Members for Braintree (Mr. Newmark) and for South-West Hertfordshire (Mr. Gauke) are members. What it has said deserves some airing, because there has not yet been an opportunity to do so.
	If we review the history of the doubling of APD, we see that it is not altogether a happy story. The last significant rise, as I pointed out to the hon. Member for Bishop Auckland, was announced in March 2000 and implemented in April 2001. At that time, therefore, Ministers gave roughly a year's notice of the rise. They helpfully explained at the time that the delay
	"would allow airlines and tour operators plenty of time to adjust their marketing and pricing strategies to the new structure."
	That was only a few years ago.
	By contrast, the current rise was announced on 6 December last year, in the pre-Budget report, for implementation on 1 February this year—not a year's notice or even six months' notice, but less than two months' notice. There was no question this time, then, of allowing airlines, tour operators and especially passengers "plenty of time" to adjust. Indeed, those passengers who had already bought tickets dated after 1 February, and to whom price rises were passed on, were given, as my hon. Friend the Member for Christchurch said, no time to adjust.
	The Treasury Committee elegantly described that as the "first element of retrospection" of the rise that the clause seeks to bring into effect. We are therefore bound to ask the Financial Secretary: why the rush? Why did Ministers give a year's notice of the last significant rise in APD, but less than two months' notice of this one? I think that we know the answer, to which my hon. Friend the Member for Braintree alluded in relation to the evidence heard by the Treasury Committee. The Chancellor was not, it seems, overcome by an urgent desire to hurry through a reduction in emissions by the means of APD, but simply grabbing the first instrument to hand to help him to pay off the £153 billion that he plans to borrow over the next five years.
	There are more questions. For instance, what estimate has the Treasury made of the number of passengers who paid the new rates of APD on tickets dated after 1 February, when many airlines—as the Treasury will have anticipated—pass the cost of the rise to passengers, and what estimate has it made of the cost to those passengers? How much will they pay in total? Can the Minister confirm that the Federation of Tour Operators has issued judicial review proceedings against the Chancellor in relation to the rise, that the Government have acknowledged the service of the claim, that a judge has directed that they must serve their defence by this Friday, and that the court has directed that the case be heard quickly with the intention that judgment may be given by the end of July?
	I mentioned a moment ago that the Treasury Committee had described this manoeuvre as the "first element of retrospection". This takes us to what it described as the "second element of retrospection". It observed that
	"the liability to pay Air Passenger Duty at the new higher rates will effectively be incurred before the House of Commons has authorised the increase".
	The Committee concluded—I consider this an important section of what it said on the subject—
	"As a general rule, we consider that, where increases in rates of duties or taxes are proposed in the Pre-Budget Report, those increases should not come into force until after the House of Commons has had an opportunity to come to a formal decision on the proposed increase following the Budget. We draw the attention of the House of Commons to the unusual timing of the implementation of the increases in Air Passenger Duty, for which the Treasury has not cited any relevant precedents."
	That carefully crafted reproof—I do not know why the Financial Secretary is wincing; I am merely reading what the Select Committee had to say—suggests that any precedent cited by the Treasury was not relevant.
	The Financial Secretary is on record as citing two specific precedents: the supplementary charge on North sea oil announced in the 2005 pre-Budget report, which was introduced with effect for accounting periods from 1 January 2006, and the increase in fuel duty announced in the 2006 pre-Budget report and implemented from midnight. My recollection is that he cited both those precedents during the debate initiated by my hon. Friend the Member for Christchurch on 27 February. Unfortunately, both those precedents look a little dubious. As the House of Commons Library points out,
	"It is arguable that these examples do not provide a precedent that captures all the aspects of the rise in APD rates: for example, the amount of time between the implementation date, and the date the House formally approved the measure (i.e.: that it was a matter of weeks, not days); the nature of the tax change (that it was an increase in tax rates. Not just a tax continuation), and the fact that projected receipts from the change would not have been significantly affected by a delay in the implementation date (either from taxpayers taking account of the announcement, or external factors affecting the yield from the levy)."
	In other words—this touches on a point raised earlier by the hon. Member for Falmouth and Camborne (Julia Goldsworthy)—consumers have not usually pre-booked the fuel, or the alcohol or tobacco, that they consume immediately after a budget or pre-Budget report rise in duty on those products. The North sea oil supplementary charge was essentially driven by a strong surge in oil prices, and was implemented immediately to prevent forestalling—the practice of taking advantage of any implementation delay to amend tax planning strategies. As the Library puts it,
	"this type of calculation would not be relevant in setting the rates of an airport departure tax".

Adam Afriyie: The least well-off tend to book their flights much further in advance, because the earlier a booking is made, the better the deals available. On that basis alone, will those people not be disproportionately affected?

Paul Goodman: My hon. Friend makes a fair point.
	My hon. Friend the Member for Chipping Barnet (Mrs. Villiers), the shadow Chief Secretary, has received a letter from the Financial Secretary citing further precedents. We want to examine those, because the Library note on the other precedents that he cited is extremely interesting.
	That brings me directly to the amendments tabled by my hon. Friend the Member for Christchurch—

Edward Leigh: May I say at this point that my hon. Friend is making such an elegant case against the Government that he has persuaded me to vote for the amendments?

Paul Goodman: I was waiting for someone to make that point. I am only surprised that my hon. Friend needed persuading to vote for them. Evidently I have not entirely mastered his psychology: I must pay more attention in future.
	I entirely agree with my hon. Friend the Member for Christchurch that the way in which the APD rise has been implemented has been—as the Library note confirms— legally and procedurally dubious, to say the least. But I doubt that the Financial Secretary will spring to his feet tonight to announce that the Chancellor has accepted the Select Committee's reproof and to guarantee that his successor will not implement a tax increase in this way in future without consulting the House first.

John Redwood: Given the serious legal proceedings that the Government have had to accept, were they to lose the case presumably it would cost us even more money as taxpayers, because they would have to refund all the money and go to enormous administrative expense to sort out the mess. If the Government gave in on the amendments, they might do all of us a favour by saving us money in the event of defeat in the courts.

Paul Goodman: My right hon. Friend makes a fair point. A sword of Damocles is hanging over the Government. I do not think that the House of Commons is the right place in which to decide what change is legally in order and what is not, but it may well be that the Government have been as careless about the legal aspects as they appear to have been with the procedure.
	Where I part company with my hon. Friend, to an extent, is over his belief that passengers who purchased tickets between 1 February and Budget day, 23 March, and who have consequently had part or all of the Chancellor's APD rise passed on to them by the airlines, are likely to be reimbursed by them if his amendments are passed. This is a crucial point. Part of the debate has been conducted almost on the assumption that APD is paid directly by passengers, but in fact it is paid by the airlines. It is hard to see how the amendment would not simply result in a windfall for the airlines—a windfall of some £100 million, according to our calculations and my hon. Friend.

Christopher Chope: I think my hon. Friend has misunderstood my amendment. It would not give relief only to passengers who had purchased tickets between 1 February and 21 March; it would give relief to all passengers who had purchased tickets for travel between those dates, regardless of when they had purchased them. Some might have purchased them many months earlier.

Paul Goodman: The key point, though, is that it would give relief to the airlines, because the airlines, not the passengers, pay the duty. One of my reasons for asking the Financial Secretary earlier how much of the increase had been passed on to passengers was the genuine uncertainty that exists on this point. We fear that as a result of the amendment the airlines might simply receive the windfall, say "Thank you very much" to the Treasury, and not pass on the £100 million to the passengers.
	My hon. Friend seems to be arguing that the genie can somehow be compressed and put back in the bottle. We are not convinced that the damage caused to passengers by the companies that chose to pass on the retrospective rise can be addressed by the amendment, but we are certainly not happy to leave the matter there. Although we cannot support my hon. Friend if he insists on pressing his amendment to a vote, we intend to table a new clause at a later stage that will prevent the Chancellor's successor from behaving in the same way in relation to APD. I hope that it will have the support of my hon. Friend as well as that of other Members.
	In conclusion, this retrospective rise should not have happened. As my right hon. Friend said, it may be found to be illegal by the courts. However, it is genuinely difficult at this stage to correct the effects on passengers of a change in duty that has already come into effect—to put the genie back into the bottle or, groping for another cliché, to lock the stable door after the horse has bolted. However, as I say, we intend to table a new clause to prevent the Chancellor's successor from carrying out such a retrospective manoeuvre again.

John Healey: I think that this has been quite a good debate. All the contributions, with the exception of that by the hon. Member for Wycombe (Mr. Goodman), have been clear. His was extraordinarily convoluted. It twisted and turned. I appreciate his position and look forward to any substantive contribution that he may make to the debate on air passenger duty at subsequent stages of the Bill.

Paul Goodman: The Minister finds me convoluted. May I simply ask him a straightforward question? Does he agree with the Treasury Committee that he has not cited any relevant precedents for this retrospective increase?

John Healey: The hon. Gentleman said himself that he wants to study the letter that I have sent to the hon. Member for Chipping Barnet (Mrs. Villiers), with a whole list of precedents, which I will mention in a moment. Clearly, they are relevant and he wishes to study them. The Treasury Committee did not have access to that information when it came to its conclusions and published its report.

Paul Goodman: Will the Minister give way?

John Healey: I will, although I want to deal with some of the points that those who have contributed have made to the debate.

Paul Goodman: Why did not the Treasury Committee have access to the precedents?

John Healey: The information before the Treasury Committee did not include the information that I was able to set out, first, to the Chairman of the Procedure Committee and then to Conservative and Liberal Democrat Front Benchers who lead on the subject.

David Gauke: I am a member of the Treasury Committee. We hold a number of hearings after a pre-Budget report. There was plenty of opportunity for the Government to cite precedents that we might have considered to be relevant, but the Government did not take that opportunity. Can the Minister explain why?

John Healey: For the purposes of this debate, there are a number of precedents that I wish to cite. I set them out in some detail to the Chairman of the Procedure Committee, to which I will refer, to Conservative Front Benchers and to the hon. Member for Falmouth and Camborne (Julia Goldsworthy), who speaks for the Liberal Democrats on the matter. What is clear is that aviation currently is responsible for nearly 6 per cent. of the United Kingdom's carbon dioxide emissions, but that figure is rising and aviation is also responsible for other non-carbon dioxide emissions that contribute to climate change. Very few contest the case that that under-taxed industry should at least cover the climate change costs that it imposes, and very few contest that action is necessary to encourage aviation to reduce the climate change impact.
	While the Government continue to push and have led the arguments for aviation to be included in the European Union emissions trading scheme, which we view as the best, most effective and most efficient policy instrument available, it is right to look at what can be done domestically with the policy tools at our disposal at this point. That is what we said in the air transport White Paper in 2003, in the Budgets in 2004, 2005 and 2006 and in the energy review in 2006.

Christopher Chope: If that is so, can the Minister confirm today that, when the European emissions trading scheme comes into place, air passenger duty will be abolished, because that was a pledge that his ministerial colleague was unable to give the European Committee the other day?

John Healey: rose—

The First Deputy Chairman: Order. I wonder whether I could ask the Minister to move on quickly to the amendments currently under discussion. Perhaps the comments made would be more appropriate in the debate on clause stand part.

John Healey: Of course I will, Mrs. Heal. It has been a wide-ranging debate to date. Let me return to the question of the air passenger duty and the proposals of the hon. Member for Christchurch (Mr. Chope).
	To be clear, air passenger duty is a tax on airlines, payable by airlines. It is charged per passenger at the point of departure from UK airports, so it is a departures tax. It is not a ticket tax, not a booking tax, not a purchase tax. Again, the tax point is the point of departure by the passenger from the UK airport, not the point of purchase of the flight ticket. That is just as it was in 1994 when the APD was introduced by the previous Government and it is just as it has been for every change since.

John Redwood: Can the Minister tell us how much of the extra duty has been charged directly to the customers who had already bought their tickets, and how many airlines have put surcharges on all subsequent ticket sales?

John Healey: I cannot precisely, because clearly that is a commercial arrangement between the airlines and their passengers, but, for example, Ryanair e-mailed its customers who had pre-booked and direct debited the increase in the air passenger duty from those accounts. BMI and British Airways waived the increase and absorbed the costs. There was a variety of different responses from different commercial operators. The right hon. Gentleman would appreciate that that is properly a commercial matter for those companies in relation to their customers.

Brooks Newmark: Further to what my right hon. Friend the Member for Wokingham (Mr. Redwood) has said, the Minister has just said that the money is to be used to deal with the damage created by CO2. Therefore, I would like to ask him a specific question: how much of the £100 million that is being raised will be used to deal with the damage that CO2 has created?

John Healey: The Chancellor was clear in his pre-Budget statement and I have made the position clear since then in different debates and in Select Committee inquiries. The rise in the air passenger duty will contribute to the increase in spending that we are looking to be able to deploy to some of our priorities, including, specifically, transport and environmental protection. This may interest the hon. Gentleman. He mentions £100 million, but in 2005-06, as the public expenditure statistical analysis confirms, we spent as a Government £8.4 billion on environmental protection. He may have seen yesterday that we published the new PESA outturn estimates. For 2006-07, the spending on environmental protection was £9.7 billion.
	Mr. Illsley, I welcome you to the Chair and to this debate. The intention to introduce this legislation to Parliament was announced to Parliament in the pre-Budget report on 6 December and the change has effect for all flights departing after 1 February 2007.
	I pay tribute to the hon. Member for Christchurch. As members of the Committee recognise, he has been dogged in his pursuit of the issue. He raised it on a point of order, in an Adjournment debate with me, in a debate on the Budget resolutions, although none of the others from his party who have signed his amendment did so, and of course he has raised the matter today. The decision that we have taken, the move that we have made and the provision in the Bill is not an illegal act, as he asserts. We will mount a strong defence in the case that the Federation of Tour Operators is bringing to the courts. I am confident that our arguments will carry the day.
	The hon. Gentleman advanced three arguments. Let me contest each and every one of them. The measure is not retrospective; it is not out of step with established parliamentary procedure; and it is not a measure going through the House without parliamentary scrutiny and debate. I will take those in reverse order.
	On the issue of proper debate and scrutiny in Parliament, after the pre-Budget report statement on 6 December, Treasury officials and the Chancellor gave evidence to the Treasury Committee on 12 and 13 December; I gave evidence to the Environmental Audit Committee on 31 January; I gave evidence to the Treasury Committee on 7 February; I wrote to the Chair of the Procedure Committee on 27 March; I answered an oral question in this Chamber in January and I answered the hon. Gentleman's Adjournment debate in February. Finally, the House had the opportunity to debate the resolution over four days following the Budget, before the taxpayers concerned had to pay out any of the increased sums for which they were liable. At the end of those four days of debate on the Budget resolutions, the House voted on the proposals for APD announced in the pre-Budget report. The vote was carried by 296 to 84—and I must say that the Whip, my right hon. Friend the Member for Rutherglen and Hamilton, West (Mr. McAvoy), would welcome a majority of 212 on several other issues that face us. We are also now having scrutiny and debate as part of our consideration of this Finance Bill. Therefore, the first assertion is not founded.
	The second argument related to parliamentary precedent. In announcing and putting forward the provisions for the rise in APD, we have used provisions under the Provisional Collection of Taxes Act 1968. We followed established procedure that has been used on a number of occasions by this Government and previous Governments. I confirmed that to the Chairman of the Procedure Committee in March. I understand that that Committee has neither considered nor reported my letter, and I therefore wrote separately to the hon. Members for Chipping Barnet and for Falmouth and Camborne to make many of the same points as were made in the letter.
	I wish to quote a couple of passages from that letter. The hon. Member for Twickenham (Dr. Cable) is right that some of the precedents relate to anti-avoidance, but by no means do all of them:
	"Others include, for example, the resolution to charge income tax for the 2002-2003 financial year...at the specified rates."
	An older precedent mentioned was the petroleum revenue tax:
	"In August 1978, the Government announced a package of changes to the tax, including an increase in the rate to 60 per cent. from 1 January 1979. The measure was not enacted until the post-election 1979 Finance Bill...These precedents are in addition to the one I cited in the House of the North Sea Oil taxation measures"
	—the increase in the supplementary charge—
	"announced in the 2005 Pre-Budget Report"
	and implemented from 1 January 2006. Therefore, it is clear that established parliamentary conventions and procedures are not being broken.
	Finally, let me turn to the third argument on retrospection. My hon. Friends the Members for Bishop Auckland (Helen Goodman), for North-West Leicestershire (David Taylor) and for Wolverhampton, South-West (Rob Marris) understood the point to do with this clearly, although a number of other contributors did not. I must say to the right hon. Member for Wokingham (Mr. Redwood) that the arguments are not at all convoluted; they are straightforward. Far from being retrospective, this tax change was pre-announced. The pre-Budget report documents made it clear that the new rates would apply to passengers departing the UK from 1 February. I accept that there is an issue in respect of those passengers who pre-booked before the pre-Budget report of 6 December, but the airlines had almost two months to deal with that. I say to the hon. Member for Wycombe that they are the liable parties. The airlines are responsible for payment: the airlines choose, and have chosen, whether to levy the APD increase on their passengers or to absorb the costs.
	Let me repeat that the distinction is principally to do not with goods and services, but with the point of tax. The point of tax is when a flight takes off, not when it is booked. All previous changes to APD have applied to both flights that were already booked at the time of announcement and to flights booked subsequently. That did not make those changes retrospective. How or whether to pass on the cost of the tax is a commercial matter for airlines. It is a matter to do with their pricing policy, their judgment and the terms and conditions of their ticket sales.

Edward Leigh: This is a theological argument about dancing on the head of a pin. What about the public? They have no choice. It does not matter whether Ryanair keeps the money or gives it back. The Government can blame it or not. What about the public? What about somebody who has pre-booked his ticket and is now surcharged? Do such people not have any rights?

John Healey: It is not a theological argument. It is a principled argument that is based on legislative and parliamentary precedent. For the hon. Gentleman's benefit, let me add that because APD is a tax on airlines and not passengers, if a flight that is booked is cancelled or not taken, no APD is liable. Whether an airline then repays to the customer the equivalent sums of the APD that they have already taken is a matter for the airlines, and a question to do with their terms and conditions. I and many other Members have had experience of constituents who have found it difficult to get that APD repaid when they have not taken flights that they have booked and paid for.

Rob Marris: Many airline passengers are aware that the actual price of the service that they are buying is more likely to vary upwards than downwards and that it is more likely to do so the longer the interval between when they book and when they fly, because of fuel surcharges which are commonly added in by many airlines. Therefore, passengers are aware that prices can change.

John Healey: It is also frequently the case that people or organisations make decisions on investments, purchases or pricing without having full knowledge of how the tax position may change.
	I wish to emphasise that following the pre-Budget report I and officials at the Treasury and Her Majesty's Revenue and Customs held many meetings with those affected by the change, including representatives of airlines, travel agents and tour operators. During those discussions, I was able to clarify a couple of points to them, on which I wish to update the House.
	The hon. Member for Braintree (Mr. Newmark) raised an issue to do with package travel regulations. Scheduled airlines were generally able to pass on the cost of APD if they wished—although some, of which I have cited two, chose not to do so. We recognise that tour operators, who account for about 15 per cent. of the flights on which APD is charged, are restricted by the Package Travel Regulations 1992 from passing on increased costs to customers. The European Commission is planning a review of the directive from which the regulations stem. We believe that it should be fundamental and wide-ranging. We expect the EC soon to issue a discussion document setting out options for the review, and my right hon. Friend the Minister for Trade, Investment and Foreign Affairs has today written to the commissioner for consumer affairs underlining the importance that we place on the review of the directive and urging that any review should be wide-ranging and fundamental.
	The next point relates to how APD is currently defined in terms of classes of travel; I think that the hon. Member for Christchurch referred to the consultation on this earlier. The aviation and tour operator industries have raised with me concerns about the current structure of APD, which has not changed since it was introduced more than 10 years ago, and in particular in relation to the treatment of seats on business-only flights or seats marked as premium economy. Following initial meetings with the industry, we announced in the Budget that we were open to reviewing the issue, given that the current structure might not send appropriate environmental signals and might cause market distortions. I can confirm today that HMRC has issued a consultation document seeking further information on possible options for change. I have placed a copy of that in the Library and it is also on the website.
	In summary, the amendment would cost the Government £140 million—not £100 million, as the hon. Member for Christchurch suggests. The arguments that he mounts that this is a move without parliamentary precedent and without legal basis, that it is retrospective and that it has not been subjected to parliamentary scrutiny and debate are all wrong. I hope that I have been able to demonstrate that. I hope that he will not press his amendment to a Division. If he does, I shall have to ask my hon. Friends to oppose it.

Christopher Chope: I am grateful to the Financial Secretary for his response and for his comments about the package tour regulations, but I do not understand why the Government did not take account of them when they decided to double air passenger duty. Back in 1993, when those regulations were in place, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), the then Chancellor, introduced the concept of air passenger duty in his November autumn statement. He admitted that he did so because, unlike the present Chancellor, he was in need of extra money at the time. He was brave enough to say that, instead of trying to cover up the situation as some sort of environmental good thing.
	My right hon. and learned Friend did not implement the tax, however, until 1 November 1994. He delayed implementing it not because he could afford to do so—he needed the money—but because he took the view that it would be inequitable to implement it earlier. My noble Friend Lord Cope of Berkeley, the then Paymaster General, told this House:
	"It would be unreasonable to expect tour operators to take the theoretical possibility of new taxes into account"—[ Official Report, 31 January 1994; Vol. 236, c. 643.]
	For that reason, there was a very long lead-in period. The then Government knew about the position of tour operators, which has not changed under subsequent package tour regulations. Why, therefore, did this Government not take the same view this time? That is why they find themselves in the courts, and why the Financial Secretary is desperately exchanging notes with the European Commission before Friday, when he has to hand in to the High Court his submission in answer to the judicial review. I am therefore not convinced by that part of the Government's argument.
	The Treasury must have known about this measure at the time of last year's pre-Budget report. It must have decided that, irrespective of the situation, it would proceed and impose a tax that will result in tour operators being charged £44 million, which they will not be able to recover from their customers. That is a windfall tax on tour operators—a point that needs to be taken into account when bearing in mind what my hon. Friend the Member for Wycombe (Mr. Goodman) said about the consequences of accepting my amendment.
	I was also concerned at the Financial Secretary's saying that he was playing the situation by the book. He gave a technical, carefully worded response, saying that this duty was not retrospective because under the terms of clause 12, all the taxpayers concerned will not have to pay out any sums incurred before the Budget. He means by that not our constituents—the people who will pay these extra charges in order to travel by air—but the airlines. He implied in that careful use of language that because, technically speaking, the taxpayer in this case is the airline concerned, rather than the customer of that airline, the duty is not retrospective. That is disingenuous beyond belief. Constituents who booked before 6 December holidays and flights taking place after 1 February, and who were charged a surcharge when they got to the airport, have written to me about this issue.
	If my amendment were carried, it would alleviate the burden in respect of the period between 1 February and 21 March and would provide extremely welcome relief to many passengers. It would not deal with those passengers who pre-booked their summer holidays, but it would provide relief for all those who booked in advance for their spring or half-term holidays, including most skiing holidays. As a matter of interest, I would probably be able to claim back money in respect of a foreign exchange to France by my son, who went to improve his French. That is not a significant issue; however, many other people would be in the same position if the amendment were carried.
	I thank my hon. Friend the Member for Wycombe for his courtesy; he powerfully reinforced the case that I was making for the amendment. My hon. Friend the Member for Gainsborough (Mr. Leigh) said that he was persuaded by his argument. It was only in the last few moments that my hon. Friend the Member for Wycombe poured cold water on the whole proposition. He suggested that it would somehow be wrong to enable airlines to enjoy a windfall gain as a result of this tax not being retrospective. Airlines such as Ryanair—I mention that one because it has spent a fortune on full-page advertisements campaigning on behalf of its customers against this awful tax—would not refuse to reimburse its passengers who travelled on flights between 1 February and 21 March; to do so is unthinkable. My hon. Friend the Member for Wycombe has not adduced any evidence to suggest that these commercial organisations would refuse to refund the money. In fairness, he does them an injustice if he thinks that they would behave in that way.

Rob Marris: I can give the hon. Gentleman some evidence, although it is an assumption so far as Ryanair is concerned. Ryanair is the kind of airline that used to charge passengers for using a wheelchair.

Christopher Chope: I know that Labour Members do not like Ryanair, which I think has been voted by its passengers the airline of the year and is one of the fastest growing, most successful airlines. My only regret is that it is not British-owned, but it is providing a very good service for its passengers. I am proud, as the Member of Parliament with Bournemouth international airport in his constituency, that Ryanair is one of its more popular operators. I hope that it will expand its number of routes next year.

Quentin Davies: In the event that my hon. Friend's amendment is passed and an airline subsequently refused to reimburse its customers for money that it had extracted from them on the basis that it needed to meet the tax liability imposed retrospectively by the Government, would it not be in a very weak position in the courts, having obtained money under entirely false pretences?

Christopher Chope: My hon. Friend is absolutely right.
	The sad thing is that the argument that the airlines might not reimburse the money and might pocket it for themselves and their shareholders is the only argument on which my hon. Friend the Member for Wycombe relies in saying that he does not want the House to support the amendment. I welcome his re-stating our party's opposition to the principle of retrospection and his saying that we will table a new clause on Report, but actions speak louder than words, and the clearest message that our party could send tonight to our constituents is to vote against this example of retrospective legislation. It is very unfair and, as has been pointed out, it will be particularly damaging to those who booked their flights furthest in advance, who tend to be the weakest members of our society financially. It is time for us to give them some relief from this ghastly Government, so I hope that Members will support me in the Lobby this evening.

Question put, That the amendment be made:—
	 The Committee divided: Ayes 29, Noes 260.

Question accordingly negatived.

Vincent Cable: I beg to move amendment No. 13, page 8, line 29, at end add—
	'(7) This section shall come into force on a day which the Treasury may by Order appoint.
	(8) No order may be made under subsection (7) unless the Treasury has compiled and laid before the House of Commons a report containing an assessment of the impact of air passenger duty on the objective of reducing carbon emissions, and including an analysis of the comparative effectiveness in meeting that objective of the taxation of air passengers, on the one hand, and of aircraft according to their emissions levels, on the other.'.
	In the debate that we have just had on retrospectivity, the discussion strayed into the environmental aspects of the tax, so some of the points that we are about to deal with have been covered already. I do not want to duplicate them, but this amendment would provide a mechanism obliging the Government to look more carefully at how environmental differentiation can be introduced into the taxation of the aviation industry.
	In his reply to the previous debate, the Financial Secretary sought to justify the Government's proposals in environmental terms, and I think that he said that the air passenger duty was introduced in 1994. I have not checked on that year's Budget speech, but I should be very surprised if the word "environment" passed the then Chancellor's lips. It was an era when politicians who thought at all about the climate thought about global cooling rather than warming, so the eloquent argument about carbon emissions is something that we have discovered in retrospect.

Paul Goodman: I am grateful to the hon. Gentleman for giving way. That word did not pass the Chancellor's lips.

Vincent Cable: Indeed, and the tax being proposed at that time was not an environmental tax at all, but a revenue measure. However, the Financial Secretary was right to say that we now confront a different kind of world, where there is a legitimate and powerful concern about the environment, and particularly about global warming. As he rightly said, carbon emissions from the aviation industry are substantial and growing very rapidly. The question is whether the air passenger duty is a reasonable proxy for an environmental tax.
	Can the environment be taxed in a better way? There is a strong argument that the air passenger duty is a very clumsy way to tax the environment. That point was made in a brief interjection by the right hon. Member for Suffolk, Coastal (Mr. Gummer), who was ruled out of order but whose point was nevertheless correct. The current duty penalises airlines that use their aircraft efficiently. The same aircraft travelling full pays twice as much duty as one travelling half empty, so there is no incentive to be efficient. Moreover, the duty is inequitable because it bears particularly heavily on low-cost airlines and their passengers.
	That is compounded by the fact that this country has a very inefficient system for allocating slots for landing and take off. They are allocated free, and are grandfathered. No consideration of efficiency is involved, so airlines are under no pressure to use their aircraft efficiently in terms of passenger use. Very often, slots are acquired and retained so that competitors are kept out of the business but, were they auctioned in a more economically rational way, there is no doubt that aircraft would be used more efficiently. The combination of inefficient allocation of airport slots and the existing taxation system is pretty rough and ready, and an ineffective environmental measure. However, no doubt the Minister's figures are right and he is working on Treasury assumptions about the elasticity of demand. Doubling the tax will no doubt have a rough and ready impact on carbon emissions. The question is whether it could be done significantly better.
	This morning, the Treasury issued a ministerial statement. When I started to read it my heart jumped because the first sentence said that "air passenger duty", as defined,
	"could send inappropriate environmental signals and cause market distortions".
	At last, I thought, the Treasury has got the point and it will look at different options. However, it turned out that what was produced in a long and complicated consultation paper has nothing much at all to do with the environment; it would produce simply a more equitable sharing of the burden of air passenger duty between different categories of passenger. The Government have spotted that there are such things as airlines with only one travel class and their passengers may qualify for the lowest rate of duty. The Government are concerned about the anomalies and have produced a complicated consultation paper to deal with them. I have not yet had a chance to study it, but it does not seem at first sight—the Minister may correct me—to have much to do with environmentalism.

John Gummer: Has the hon. Gentleman noticed that almost all the proposals will in fact increase the Treasury take with no noticeable environmental difference? Is not that all of a piece with the legislation?

Vincent Cable: The right hon. Gentleman has the advantage over me, because he has had the chance to read the consultation paper carefully. I am sure what he says is true and that when I study the document that conclusion will emerge.
	Is there a better way of taxing the aviation industry that captures more effectively the environmental impact? If we were starting from scratch and did not have to worry about legal constraints, the obvious thing would be to tax the fuel. That could be done on domestic flights, although they are only a small percentage of the total, but it would be difficult to implement internationally, partly for treaty reasons and partly because airlines would simply hop from one low-fuel jurisdiction to another and fill up where the duty was lowest. There would thus be no point in pursuing that theoretically attractive option.
	We suggest a simple mechanism, whereby the tax is applied in relation to the emissions produced by different types of aircraft. The model is the environmental differentiation in vehicle excise duty; different categories of vehicle are classified according to their carbon dioxide emissions and aircraft could be similarly banded. It would be a one-off tax at the point of departure, not at all complicated and probably simpler to administer than the present system. Because it would be a tax on departure and related to the CO2 emissions of a particular type of aircraft it would implicitly discriminate against short-haul flights. Paying the same duty whether the flight is to Edinburgh or Australia is not environmentally desirable because there are genuine alternatives to short-haul flights. There are no easier forms of public transport to Australia, but it is possible to switch to rail to travel to Edinburgh, Newcastle or even Cornwall, so a form of duty related to emissions makes more sense if it discriminates against short-haul flights. Environmentalists argue, too, that the greatest CO2 emissions are at take-off, when the booster impact of the engines is strongest.
	No doubt there are technical problems that would have to be resolved, but we tabled the amendment to invite the Government to consider that option and to make a judgment about how such a system might operate before they proceed further down the route of more increases in air passenger duty. We merely ask them to study the feasibility of the alternatives. They are embarking on consultation about different methods of taxing aviation. I am surprised that its reach is so narrow and that the Government are not willing to look at the possibilities we have suggested, which are driven by environmental considerations.

Paul Goodman: It is a pleasure to see you in the Chair, Mr. Illsley. May I encapsulate what I want to say on behalf of the official Opposition about the amendment by saying to the hon. Member for Twickenham (Dr. Cable) that if his amendment had proposed only an assessment, we would have been tempted to vote for it? However, it does not do only that, so for that reason, as I shall explain, we do not propose to support it. Indeed, I shall explain why we believe that it is irresponsible.
	Let me begin to consider the alternatives that the hon. Member for Twickenham referred to by making an assessment of air passenger duty itself. Perhaps the best way to start is to see what APD's most enthusiastic supporters, including the Financial Secretary, say about it. Apparently, APD is "not an environmental tax" and is not related to "a concern about emissions" or more efficient aircraft and "not related at all" to "more efficient use" of aircraft that are flying.
	Who said that? One might have thought that it would be the hon. Member for Twickenham, but it was, in fact, the Financial Secretary when he appeared before the Treasury Select Committee last year. He may have thought, in retrospect, that he was not clear enough, so he came back this year to remove any possible ambiguity. He said that APD was
	"a blunt instrument as far as the environment goes. It is not the best policy instrument to try to deal with the environmental impacts of aviation"
	and
	"not even the best tax instrument to deal with the effects of aviation".
	That is the unvarnished view of the Minister whose task it is to sell the doubling of this tax to the Committee tonight. As the hon. Member for Twickenham said, the Financial Secretary has placed a consultation document in the Library today, which relates to the industry's view that the way in which air passenger duty defines different classes of travel could send inappropriate signals and create market distortions.
	In general terms, the Financial Secretary was very plain in his view of APD, so I think that we should return the compliment. We agree with the green critique that he set out. Indeed, we could scarcely put it better ourselves and I do not think that the hon. Member for Twickenham could put it any better either. The main points are well rehearsed: APD is not linked directly to emissions; it does not provide any incentives to use more fuel-efficient aircraft, and so forth.
	The hon. Member for Twickenham referred to what my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) said when he introduced APD. Indeed, my right hon. and learned Friend did not use the word "environment" at all. He said at the time, rather baldly, that air travel was "under-taxed" compared to other sectors of the economy. In short, APD is not a green tax, but an aviation tax.

Julia Goldsworthy: Is it not also true that the inequality that the consultation document is attempting to resolve takes us back to the point for which air passenger duty was created? As well as airlines such as Eos today, back in 1984 we also had Concorde. Such airlines benefited from exactly the same differential impact.

Paul Goodman: I must confess that I have not yet got to the bottom of the consultation document, but if the hon. Lady is saying that APD is an aviation tax, I agree with her. Where we part company is that we are not opposed in principle to an aviation tax. I could not credibly stand at the Dispatch Box and argue that we were when my right hon. and learned Friend the Member for Rushcliffe introduced it and set out the reasons for it so clearly. We support the principle of aviation taxation. We took that view in government, we have maintained it in opposition and we certainly do not intend to resile from it tonight.
	That is a vital point when considering the Liberal amendment, which is designed to assess the merits of APD against the merits of alternative means of reducing emissions, while implementing a delay—a key point—in the APD increase proposed in clause 12. In other words, if the amendment were accepted, the increase would be delayed. It simply would not happen as envisaged.
	There is no timetable in the amendment for when the study that the hon. Member for Twickenham referred to would report. The Liberal Democrats want an assessment and they want a delay. We certainly agree with them that there should be an assessment. Indeed, we are already making our own assessment. Our policy consultation document "Greener skies", which quotes the Financial Secretary at length, confirms that, together with our quality of life policy group, we will consult the industry.

Julia Goldsworthy: When it comes to not setting a timetable, does the hon. Gentleman agree that, if the Treasury is desperate for the money, that is all the more reason to make sure that the consultation is undertaken rapidly?

Paul Goodman: I am worried about proposing a delay without proposing a firm alternative. I want to come to that point in due course.

John Gummer: I wonder whether I can help my hon. Friend. It is certainly my view that any assessment that was going to hold water on this issue would take some time, because the Treasury has done little work on this matter. It is a great sadness that the Treasury is so Brown and not green. An assessment will take a long time. That adds weight to my hon. Friend's argument—although I am in general sympathetic to the Liberal amendment.

Paul Goodman: That is why I would be extremely pleased—as, doubtless, would the Liberals—if the Financial Secretary said tonight that, once the clause is passed, the Government will carry out an assessment of a replacement for APD. The Financial Secretary has never ruled that out. I am interested to know whether he will do so when he responds to the debate. We believe that there should be an assessment. What I find hard to understand is why the Liberals believe that there should be an assessment. They have already announced their policy on aviation tax. The document that sets out their so-called green tax switch, to which I will return in a moment, states that their policy is
	"to replace the existing airport passenger duty with an aircraft tax based on the emissions of each aircraft".
	The hon. Member for Twickenham went into that. That is a perfectly sensible option. It is in our own policy document. But, for the Liberals, it is not an option; it is a firm policy commitment, as they know. A question naturally follows: if they want to replace APD with a new aircraft tax, why have they not tabled an amendment that proposes exactly that? Why do they need the Treasury to assess their own policy?  [ Interruption. ] They may say that their proposals involve a tax increase and that one cannot table an amendment that is in order if it involves a tax increase. In answer to that, I would ask: why is it that last year—the hon. Member for Wolverhampton, South-West (Rob Marris) and I are veterans of these debates—they did exactly that in relation to vehicle excise duty?

Julia Goldsworthy: rose—

Paul Goodman: I would be grateful to the hon. Lady if she confirmed that that is exactly what happened.

Julia Goldsworthy: There is an issue about revenue-raising measures and whether they can be debated on the Floor of the House. Only the Government can propose revenue-raising measures. There is also an issue in relation to the Ways and Means resolution. The amendment has to be broadly within the scope of what is in the Finance Bill. On that basis, we were unable to introduce an alternative.

Paul Goodman: But the hon. Lady did that last year in relation to vehicle excise duty.

Julia Goldsworthy: No. We proposed changes to vehicle excise duty; we did not propose an alternative to vehicle excise duty. The issue with air passenger duty is that we cannot change it to something entirely different, because that would be outside the scope of the Ways and Means resolution.

Paul Goodman: They were both tax rises. The amendment that the hon. Lady tabled last year on VED was outside the scope of what was eligible to be tabled for debate.  [ Interruption. ] Well, the Liberals will have to explain why they were so keen last year on tabling amendments that were not eligible for debate, but will not do so this year. I suspect that the real reason is that, according to independent commentators—I am not claiming that this analysis comes from us; it comes from the Institute for Fiscal Studies—their green tax switch figures simply do not add up. That means that their proposal is not ready to fly. According to the IFS, the Liberals would fund their £8.1 billion rise in green taxes partly by raising fuel duty in line with inflation. But according to the IFS, the Government have already pencilled that rise into their spending plans, leaving the future Liberal Government, which the Liberals presumably believe will take office after the next election, with a £3 billion annual black hole in the public finances.
	That is just the start; according to the Liberals, that £8.1 billion green tax rise is actually a £20 billion green tax rise, but they will first have to produce an independent arbiter who supports their view that their new local income tax, house price tax and pensions stealth tax, which make up the remaining £11.9 billion of their £20 billion package, are somehow green taxes. I realise that the Liberals do not like to have those details ventilated in the Chamber, but it was the Institute for Fiscal Studies, and not us, that first raised those points. I would be out of order if I continued down that path, although I am certainly not out of order at the moment.

Rob Marris: Does the hon. Gentleman agree that amendment No. 13 shows the chaos of Liberal Democrat green tax policy? The Liberal Democrats want green taxes, not in order to change behaviour, but simply to enable a tax grab. They are not what most of us would think of as green taxes that change behaviour, and the amendment clearly shows that. The hon. Member for Eastleigh (Chris Huhne) has admitted to me in debate in the Chamber that the Liberal Democrats do not propose green taxes as a way of changing behaviour; they will carry on with green taxes regardless of any changes.

Paul Goodman: I certainly agree that the proposals are pretty chaotic. Again, I note that there is no substantial amendment setting out Liberal Democrat policies in any form. However, I will not carry on down that road. I have made my point, and no one has got to their feet to say that the Institute for Fiscal Studies is wrong. We agree with the Liberals that there should be an assessment, but we do not agree that there should be a delay, because a delay would prevent the aviation tax proposal from coming into effect. For the Liberals, different considerations apply, and I shall explain why. After the next election, there may be a Conservative majority, a Labour majority—personally, I am rather doubtful about that—or no majority at all in the House, but it is safe to say that there will not be a Liberal Democrat majority. I shall repeat that, in case anyone wants to challenge it: I do not believe that there will be a Liberal Democrat majority in the House.
	Unlike the two main parties, the Liberal Democrats are not overburdened with expectations of great responsibility. I presume that if they put their amendment to the vote this evening and it is defeated, they will vote against the clause, just as they voted against the measures in it at the conclusion of the Budget debate. In other words, tonight, they can cheerfully vote against the principle of aviation taxation, although they have no workable alternative to propose, knowing that they will not have to live with the consequences in office. That is not an approach that we can take. Unhappy as we are with air passenger duty as it stands, and with the Chancellor's handling of it, we simply do not believe that we can responsibly vote not to implement an aviation tax that we were responsible for designing, either by opposing the clause or by supporting the Liberal amendment.
	The House has a choice tonight on APD, however flawed the tax may be in principle, and however faulty the Chancellor may be in practice. Members can either vote with the Liberals against the principle of aviation taxation, with no workable alternative anywhere in sight, or they can take the responsible course, and take a principled stand against the short-termism and opportunism that the amendment represents.

John Gummer: I would like to be able to support the content of the Liberal amendment, because the Financial Secretary to the Treasury has been disingenuous in the way in which he has tried to defend the tax that we are discussing. The two arguments that he has used are flawed and damaging to the environment. His first argument was that air passenger duty is an environmental tax—not a very good or effective one, and not one that he would have chosen if there were anything else around, but the only thing that he could scrabble together at the time. That, roughly speaking, is his view of the tax.
	The Minister went on to say that it was not a bad tax in retrospective terms, and that he would fight very hard in the courts to make sure that nobody won a case against him. The problem for me is simple. We will need regulation and a shift—not an increase, but a shift—in taxation from taxes on the family and taxes on business to taxes on pollution. However, if the country believes that that is not for the purpose of the environment, but is merely another sleight of hand, another stealth tax in order to gather money for the Treasury, that undermines our ability to take the nation with us in the tough measures that we will have to adopt.
	I was disappointed by the Minister's reply to the last debate, because although it was ruled out of order to talk about the environment, he did so. He mentioned that the tax was environmentally healthy. He also suggested that some minuscule amount of emissions might or might not be saved on some technical arrangement that the Treasury had gone into. Everybody knows that this is a tax to raise money.
	I have a slight disagreement with the hon. Member for Twickenham (Dr. Cable), which I know he will not mind. When my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) introduced the landfill tax, he made it clear that that was an environmental tax. Even though my noble Friend the then Prime Minister allowed me to raise the rules for the defence of the sea because climate change was a real issue—and that was in the early 1980s—back in 1994, the emissions from aircraft were significant only to a very few. There were not many aircraft, the amount of emissions was not very great, and it paled into insignificance when compared with other things. The kind of nonsense that Ryanair peddles now was true then.
	Since 1994 Ryanair and others have entered the market, there has been a huge increase in emissions, and those emissions are particularly great in the United Kingdom. If they continue at the present rate, they will use up all the reductions that we can make in the immediate future in other areas of carbon emission. Of course we must be very tough about emissions from aircraft. We know that that is not easy, because many of the people who have taken advantage of cheap flights have found that that hugely improves their quality of life. Any of us trying to deal with the issue knows how difficult it is.
	That is why the Minister has done the environmental movement a great disservice by pretending that this ineffective, money-raising tax has anything to do with the environment at all, and why he knows in his heart—that is why he is looking down—that it would have been credible only if he had introduced at the same time a measure resembling the amendment, and said clearly that he needed the money. Honesty is the best policy. Whereas my right hon. and learned Friend the Member for Rushcliffe was honest, I have to say, within the rules of the House, that I do not quite catch that in the present Administration.

David Heath: The right hon. Gentleman mentioned the growth in low cost airlines. Is not one of the paradoxes of the whole issue that many of the low cost airlines are flying with relatively new planes fully laden, whereas many of the flag carriers are going round the world with virtually empty planes, causing a great deal more pollution per passenger? That is one of the problems with the Government's solution, and one of the things that our proposal would catch.

John Gummer: I agree with the hon. Gentleman. I was not attacking low cost airlines; I was merely saying that because of low cost airlines, there is a lot more flying. This tax is fundamentally a tax on the good airlines which have a proper number of people on their planes, because a full plane costs a lot more in tax than an empty plane.
	The idea that it does not matter that the Government are taxing airlines retrospectively, because airlines can pay the tax out of their profits, is the most peculiar piece of logic that I have ever heard. The truth is that the Government are taxing the airlines, which will either pay the tax themselves or pass it on. The fault is the Government's, not anybody else's. My objection is that what the Government are doing with taxation is not helpful when it comes to emissions or green taxation generally.
	There are, for example, 39 flights a day to Manchester from London, which is not a sensible way of using our slots, but there are also aeroplanes that can fly across the country and provide a real service to places such as, for example, Cornwall. Because such flights involve turboprops there are fewer emissions, and the flights can be very full. I am not opposed to examining that particular proposal, although it needs to be part of a whole package. We need to talk about slots. I understand that it is often cheaper to have a short-haul slot than a long-haul slot, which cannot be sensible.
	There is a whole range of such issues that must be looked at. I have admiration for the Financial Secretary, who is a decent man. I am not making a party political attack, but how has he allied himself with the Treasury, which has not done any of that work, which has not produced a reasonable basis for the tax and which has not bothered? The Treasury has fiddled about with a tax that it knows does not work and pretended that the tax is environmental.
	That is why I am interested in the amendment—but I must tell the Liberals that nothing would get me to vote for Liberal taxation proposals. I have got a very long memory, and I remember Liberals who supported tax on domestic fuel until there was a by-election, when they changed the policy overnight in order to win that by-election. The Liberals and taxation are about taxes that people do not think will hurt—the moment that taxes hurt, the Liberals get rid of them. The Liberal party is the party that no one can take seriously on the environment, because the Liberals resile from anything that is difficult. I would vote Labour a dozen times before ever voting Liberal, because at least you know what you are getting. As a constituent of mine said on the doorstep, "The choice in this village is between the Conservatives and the Liberals, and you never know where you are with the Liberals. If God had been a Liberal, we would have had the 10 suggestions." Homespun humour gets to the heart of the issue, so do not come telling us about your taxation policies, Liberals, because we know what they are—never do the tough thing; always talk the sweet talk.
	That is why I think that my hon. Friend the Member for Wycombe (Mr. Goodman) has done the right thing, which is to say that we will vote for this tax because it is a tax to raise money, and tell the Government that we would like two things from them. Either they accept the sense of the Liberal amendment and say that they will produce some properly audited, sensible proposals so we can all see the figures and make an environmental decision in the future—or, if that is not possible, that the Government themselves will say that there needs to be a different way of looking at taxation on aircraft that is much more closely associated with the damage that aircraft do to the environment.
	Finally, I am usually able to say such things on the side of the Government with a clear conscience, but I remember that our Prime Minister changed his view even on this matter from the morning to the evening, when he was pressed on the perfectly reasonable question why he felt in the circumstances of today that to take two holidays a year in the Caribbean and none at Chequers was reasonable. Between the morning and the evening, he moved from pooh-poohing aircraft taxation to coming forward with a nicely chiselled but largely irrelevant proposal.
	We need to be frank about this measure—it is intended to raise money—but we need also to tell the Government that they have done a serious disservice to the environmental movement by pressing it in this form, and urge them to make up for the damage that they have done.

Rob Marris: I agree with quite a lot of what the hon. Member for Wycombe (Mr. Goodman) said in response to amendment No. 13, which I shall oppose. I do not wish the increase in air passenger duty to be delayed, and I do not think that it is right to put in statute a demand for an "assessment". We need aviation taxes to raise revenue and to cover the externalities of air travel. We also need additional, not replacement, taxes to change behaviour. If, as I hope, behaviour changes as a result of these taxes, we will have had a positive result in terms of that desired outcome and the Government will not have to worry about revenues from green taxes, in this case on aviation, dropping. The central paradox, if not contradiction, in the Liberal Democrats' position on green taxes is that they do not really want behaviour to change, because that would mean that tax revenue would drop and they would have an even bigger hole in their budget.
	Nevertheless, I have a lot of sympathy with what the hon. Member for Twickenham (Dr. Cable) said about aircraft movements. In 1994, when the tax was first introduced, it had a small aircraft-related element, in that aircraft weighing less than 10 tonnes were exempt. That was to do with flights of small planes from Scottish islands, Cornwall and so on. The Liberal Democrats have a point in saying that when we try to change behaviour we should tax the right thing, which is aircraft movement rather than people. As the hon. Member for Twickenham said—this had not occurred to me and I thank him for raising it—his proposals on taxing aircraft movement rather than passengers would have a differential effect domestically as against internationally, because, as it would be calculated per take off, proportionately speaking it would hit harder domestically. He is right to say that the substitution effect is possible domestically but not for long-distance international flights, although it is possible in the case of other countries in western Europe, where one can take the train, as I do.
	I urge my hon. Friend the Financial Secretary to take on board the comments that have been made about the additional green taxes on aviation that I would like in order to change behaviour, particularly domestic behaviour. Let me give an example. We could all cite the difficulties that we have in encouraging the green agenda given the cost of travel in the United Kingdom. One of my nieces, who lives in Sheffield, has just flown to Thailand. When I asked her whether she was going from Gatwick or Heathrow, she said that she was travelling from Sheffield to Manchester, flying from Manchester to London, and then flying on to Thailand on a different flight. That is not a great green message for the next generation, but she is a young woman of modest means, to say the least, and that was the cheaper option. Additional green taxes might change things in some way in the case of domestic flights.

Julia Goldsworthy: Does the hon. Gentleman not agree that broadening the scope of the consultation would prove useful because the Financial Secretary has already said that he favours a move towards emissions trading for aviation? Would not broadening the scope help the Treasury prepare better for that?

Rob Marris: Yes, I believe that broadening the consultation is a good idea. I imagine that the amendment was tabled before the consultation document was issued, but I do not believe that primary legislation is the place to include broadened consultation or an assessment, especially given that the amendment is framed to delay the increase in air passenger duty as a nakedly, openly revenue-raising measure for the Government, which I support. I do not agree with the amendment but I hope that my hon. Friend the Financial Secretary will consider broadening the consultation on aviation taxes as a revenue-raising measure, and on additional taxes to change behaviour.

John Healey: I congratulate the hon. Member for Twickenham (Dr. Cable) on prompting a wide-ranging debate on a narrow clause. I acknowledge the consistent interest and expertise that the right hon. Member for Suffolk, Coastal (Mr. Gummer) brings to bear on such issues. That also applies to my hon. Friend the Member for Wolverhampton, South-West (Rob Marris).
	Let me say to the right hon. Gentleman that, as the hon. Member for Wycombe (Mr. Goodman) acknowledged, I have always been clear about air passenger duty. The Chancellor has also always been clear about it. When he announced the doubling of air passenger duty on 6 December, he said in his pre-Budget statement:
	"Currently, aircraft emissions are not part of the EU emissions trading scheme, and nor is aviation fuel taxed. While we continue to work internationally to seek a global agreement on reducing aircraft emissions, each country must take action domestically. From 1 February, we will double air passenger duty. For most journeys—over 75 per cent. of them—duty will rise from £5 to £10, securing extra resources in the coming spending round for our priorities, such as public transport and the environment."—[ Official Report, 6 December 2006; Vol. 454, c. 310.]
	There we have it.
	Air passenger duty has an environmental impact but it is not an environmental tax such as landfill tax, which the right hon. Member for Suffolk, Coastal mentioned. That was designed and introduced for the policy purpose of making an environmental impact.

Julia Goldsworthy: If the proposal has no bearing on the environment, why does today's written ministerial statement refer to the "inappropriate environmental signals" that the current rates of air passenger duty convey?

John Healey: The hon. Lady did not listen to me. I shall not give way again unless she listens. I clearly said that air passenger duty has an environmental impact. The consultation that I have confirmed today is about a point that business raised with me and has an environmental impact. For example, it has been put to me that the structure of air passenger duty makes it unsuitable for business-only flights, which may offer 100 business class seats on a plane designed to carry 300 passengers. Clearly, that has an environmental impact.
	However, as I explained, air passenger duty is not principally an environmental tax in the same way as the landfill tax, the aggregates levy or the climate change levy, which are designed with an environmental impact specifically in mind.
	The problems with amendment No. 13 are not so much technical as legal. International laws, within which we must work, prevent taxing emissions from aviation inasmuch as they are linked to fuel consumption. Courts have successfully struck down taxes on that basis. In a Swedish case involving the Braathens Sverige airline, the European Court of Justice held that a tax that resembled a tax on fuel, such as a tax that related to carbon dioxide emissions, was incompatible with legislation predating the energy products directive. The judgment of the European Court, of course, binds the United Kingdom.
	I have consistently said to Select Committees and to the House that our preferred policy for tackling the impact of aviation on climate change is the European Union emissions trading scheme. That is why we have worked so hard to press the case for, and achieve progress on, the inclusion of aviation in the scheme. I have also made it consistently clear over a number of years that APD is not the most environmentally effective tax for aviation. It is, however, established, available and compatible with international law. I should also add that, unlike some of the proposals suggested by others, it is a simple tax to operate and it imposes a small compliance burden on the industry and on air passengers. APD has a role to play in recognising the environmental costs of air travel, and in ensuring that air passengers understand and acknowledge the environmental costs of their actions.
	The rise in APD announced by the Chancellor will have an environmental impact. That is why, before the pre-Budget report, many of the green groups were arguing for an increase in the APD, as it is currently designed and structured. It is also why, after the Chancellor's pre-Budget report statement, groups including Transport 2000 welcomed the move.
	I hope that, having been able to air some of the wider arguments in this short debate, the hon. Member for Twickenham will not seek to press his amendment to a vote. His proposal would delay the increase in air passenger duty, as my hon. Friend the Member for Wolverhampton, South-West pointed out, and that would be undesirable. I hope that the hon. Gentleman will not press his amendment, but if he does, I shall have to ask hon. Members to resist it.

Eric Illsley: Order. Before I call the hon. Member for Twickenham (Dr. Cable) to respond, I inform the Committee that I do not intend to have a clause stand part debate on clause 12, given the length of time that we have spent debating it so far.

Vincent Cable: I should like briefly to respond to some of the points raised in the debate. The hon. Member for Wycombe (Mr. Goodman) is normally quite thoughtful, but he seemed to feel that he had to make some terribly tribal points tonight in order to wriggle out of his desperate embarrassment at agreeing with the Liberal Democrats. We have a proposal but, as far as I am aware, his party does not have anything at all apart from a general commitment to raising revenue from the aviation sector. I think that his points were slightly unworthy of him.
	I should also like to correct something for the record. We have submitted a balanced and tax-neutral alternative budget to the Institute for Fiscal Studies. I do not think that the hon. Gentleman's colleagues got that far. We suggested a series of measures that were environmentally friendly and also fairer and more redistributive. The IFS acknowledged that our sums added up. The hon. Gentleman might not like the policies, but the sums certainly balanced. We acknowledge that, following the introduction of the Budget, which included at least some of the measures that we recommended, such as cutting the basic rate of income tax, we shall have to redo the numbers. We shall do that, and take into account the environmental tax implications.
	The hon. Gentleman made a criticism that I did not fully understand. He started by asking why, since we had a workable alternative, we wanted to carry out a study on it. He finished by saying that we did not have a workable alternative, however, so I am not quite sure where his argument was leading. There are two reasons why we suggested that an evaluation was necessary. One is that any sensible party in any Government should do impact assessments even if it thinks that it has got the basic formula right. The present Government have structured that in, but not enough.
	Secondly, we are trying to find a mechanism to reach common ground with the Government. We know that they are not in the same position as us, and that they have embarked on a consultation exercise. It would be helpful if they widened that exercise; I do not see a problem with that. In his response, the Minister made what might well have been a valid point about the legal difficulties involved. We have looked at this, and we were persuaded that there would not be a problem, but perhaps there would. That is all the more reason for widening his consultation to try to answer that specific question.
	As always, the hon. Member for Wolverhampton, South-West (Rob Marris) made some good points, some rather quirky points and—by his standards—some rather silly ones. The argument that he and some of his colleagues keep repeating that revenue-raising environmental taxes and behaviour-changing measures are fundamentally incompatible is simply wrong. Environmental taxation produces both effects, and if he wants some proof, he should look at the history of his Government's climate change levy, which has raised more revenue and changed behaviour. That is a good model, on which our policy—and, I am sure, that of others—is based. As he normally makes very good contributions, I hope that he will not repeat that not very worthy point.
	The right hon. Member for Suffolk, Coastal (Mr. Gummer), with his vast experience, started off with some good and helpful criticisms, which I took in good part. He then felt that he had to embark on a bit of tribalism too, which no doubt reflects what is happening on the doorsteps in his area at the moment. He told a good joke, however, and I will repeat it at my party's fundraising dinner.
	The Minister made some good, constructive criticisms. I do not intend to press the amendment to a vote, as some useful points have been made. I accept that there is an argument against delay, and that is one of the reasons we do not intend to lose the principle behind the amendment, but will return to it in a different form that captures that criticism properly. As the Minister is opening his mind to a consultation and a review of how the tax would work, I hope that he will accept that he should look more broadly and in the direction that we have indicated. I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.
	 Clause 12 ordered to stand part of the Bill.

Clause 81
	 — 
	Criminal investigations: powers of Revenue and Customs

Julia Goldsworthy: I beg to move amendment No. 19, in clause 81, page 56, line 7, leave out 'thinks' and insert
	'has reasonable grounds for believing'.
	I should like to incorporate the few remarks that I have to make in the clause stand part debate with my comments on the amendment, tabled by me and my hon. Friend the Member for Twickenham (Dr. Cable). Clauses 81 to 84 amend the Police and Criminal Evidence Act 1984, and I want to place it on the record that it was argued forcefully from our Benches at the time that powers should be extended beyond the police to other arresting authorities, including Customs and Excise. In relation to the 1984 Act, the Bill seeks to reflect the fact that the Inland Revenue and Customs and Excise have since merged. Having said that, we need to be clear about what powers HMRC will take on, and the context in which they will be used. The need to amend the Act must not result in some kind of mission creep in relation to its scope.
	Amendment No. 19 flags up an issue that I will flag up again in clause 96 and schedule 24, which deal with penalties issued by HMRC for errors. The issue relates to the burden of proof for action that can be taken depending on what an HMRC officer "thinks". I want to query not the substance of the clause, but how we deal with the issue of objectivity. There is a range of options. We could take it that an officer just "deems" something to be the case, whereas the use of the word "thinks" implies some element of objectivity and some grounds. There should, however, be some burden of proof, whereby the officer
	"has reasonable grounds for believing"
	that the previous section should not apply. If we wanted total objectivity, that reference could be taken out altogether, and the clause would read, "if an application under Schedule 1 would not succeed". I would not want to push it that far; I am simply saying that there should be "reasonable grounds for believing" that to be the case. That issue becomes even more important when we deal with penalties for errors.
	I hope that the Minister will respond favourably, as I will raise those issues later, and what he says may have a bearing on the amendments that we choose to table. I hope he will give positive consideration to the need for more objectivity in the language. Although it could be argued that the present wording is easier to understand, there are other more complex drafting issues. It must be clear that there is that element of objectivity.

Mark Francois: I, too, welcome you to the Chair, Mr. Illsley.
	Amendment No. 19 appears to relate specifically to the production of documents under the proposed new section 14B of the Police and Criminal Evidence Act 1984. As the amendment is so specific, I propose to speak about it very briefly in order to reserve the main part of my remarks on clause 81 to our amendment No. 2.
	Amendment No. 19 seeks to alter the wording relating to the conditions under which an officer of Her Majesty's Revenue and Customs may use PACE to apply for an order that documents may be produced. The change in the wording from "thinks" to
	"has reasonable grounds for believing"
	represents a tightening of the circumstances in which the power may be exercised, and the Conservatives do not object to it.

Rob Marris: The present wording represents a subjective test, whereas the wording proposed in the amendment represents an objective test. I urge my hon. Friend the Financial Secretary to think very carefully about the Government's response to the amendment.
	Following the recent Channel 4 programme and with reference to our previous debate, let me say that a number of my constituents "think" that human activity does not contribute to global warming. Personally, I do not "think" that those individuals have "reasonable grounds" for believing that. There is a difference between the two.

John Healey: I acknowledge the broader comments made by the hon. Member for Falmouth and Camborne (Julia Goldsworthy), and the fact that the hon. Member for Rayleigh (Mr. Francois) promised to make his own broader comments on his amendment in the next group. With your permission, Mr. Illsley, I shall make my broader comments in response to him when we debate the next group of amendments.
	On amendment No. 19, however, I want to be quite precise. I can tell the hon. Member for Falmouth and Camborne that it is not necessary. The phrases "the officer thinks" and "the officer has reasonable grounds for believing" have the same meaning and effect in the circumstances covered by the clause, but I consider that "think" is clearer, simpler and shorter. Under administrative law a public officer must think reasonably; otherwise, his decision would be unlawful.
	I hope that the hon. Lady will reflect on another point. The word "thinks" is well established in United Kingdom law to identify cases in which a judgment must be made, and also to make clear who will make that judgment.

David Heath: As a veteran of countless criminal justice Bills, I would say that it is normal for the concept of reasonable belief, rather than the word "think", to be used in them. It appears in an awful lot of criminal justice Acts. The reasonableness of an officer's thought can be challenged only through administrative court proceedings, which is a very long-winded way of arriving at the right decision. I do not think that the concepts "the officer thinks" and "the officer reasonably believes" are entirely congruent.

John Healey: As I have just explained, an officer has a duty to think reasonably, because otherwise his decision would automatically be unlawful under administrative law. I respect the hon. Gentleman's experience of criminal justice legislation, and the Government have given him plenty of opportunity to accumulate it in recent years when he has spoken on such legislation from the Front Bench. He may be interested to learn, however, that the word "thinks" is used over 3,000 times on the statute book, and I believe that its use here is appropriate.
	I can tell the hon. Lady that we have received no representations suggesting that the word "think" in clauses 81 and 82 should be removed or amended since the Bill was published at the end of March—apart, of course from her amendments.
	The hon. Lady mentioned clause 96. She may be aware that representative bodies and tax professionals have expressed reservations to us about the phrase "HMRC thinks" in respect of the clause and the schedule on civil penalties, but the underlying concern raised on those provisions is entirely separate from the clauses on criminal investigations. I will not go into the distinction here. I am sure that we will have a chance to do so in Committee, but in recognition of the anxiety that has been expressed and in response to those representations that have been made, I intend to table an amendment in the Public Bill Committee to clause 96 and schedule 24 on civil penalties. However, it would be inappropriate to change the word "thinks" in clause 81, as her amendment suggests. I therefore hope that she will not press the amendment.

Julia Goldsworthy: I am somewhat reassured by that. I was hoping to ensure that the Bill was consistent in terms of the language used. I think that, under the amendment, there would be a change from the subjective to the objective. I would be quite happy with "reasonably thinks" if the Minister wants straightforward language. He is right, however, that the key area of concern has been around clause 96 and the schedule that relates to it and there have been concerns about the use of exactly that language. I and my hon. Friend the Member for Somerton and Frome (Mr. Heath) have tabled amendments on that. I hope that the Minister will accept them when we debate the measure in the Public Bill Committee. I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.

Mark Francois: I beg to move amendment No. 2, in page 56, line 47, at end insert—
	'(2B) Any power or function conferred by a provision of this Act shall, so far as it is exercisable by an officer of Her Majesty's Revenue and Customs, only be exercised by an officer who has been duly authorised for that purpose by the Board of HMRC and who has been properly trained and supervised.
	(2C) For the purposes of subsection (2B), what constitutes "properly trained and supervised" shall be decided by the Board of HMRC with the approval of the responsible Minister.
	(2D) Subject to subsection (2E), the number of officers authorised under subsection (2B) shall not exceed 500 at any one time.
	(2E) The Treasury may by order amend the number of officers mentioned in subsection (2D).
	(2F) The annual report of HMRC shall include an analysis of the use made by officers of HMRC of the powers or functions conferred on them by this Act. The report shall cover the frequency of use of the relevant powers or functions and the circumstances in which they were invoked.
	(2G) The report mentioned in subsection (2F) shall also include an analysis of the use made by officers of HMRC of the equivalent powers and functions in Northern Ireland and Scotland.'.

Eric Illsley: With this it will be convenient to discuss the following amendments: No. 18, in page 57, line 12, at end add—
	'(12) This section shall come into force on a day which the Treasury may by Order appoint.
	(13) No Order under subsection (12) may be made unless—
	(a) the Treasury has prepared and laid before the House of Commons a code of practice relating to the exercise of the powers conferred by this section, setting out in particular the circumstances in which the relevant powers of arrest are expected to be used; and
	(b) the code mentioned in sub-paragraph (a) has been approved by a resolution of the House of Commons.'.
	No. 20, line 12, at end add—
	'(12) Any power of arrest conferred by a provision of this Act as it amends section 114 of the Police and Criminal Evidence Act 1984 shall, so far as it is exercisable by an officer of Her Majesty's Revenue and Customs, only be exercised by an officer or officers serving in the Criminal Investigation Directorate of HMRC.'.

Mark Francois: As the Minister mentioned it, may I say quickly that Conservative Members welcome his admission that there has been concern on clause 96? We have received representations on the matter and we look forward to seeing his amendment in due course.
	On amendment No. 2, any extension of the powers of the state relative to the individual is a matter that should rightly provoke parliamentary scrutiny, particularly, as in this instance, where it potentially involves powers of arrest. Given that, my purpose this evening is to seek some specific assurances from the Minister about how the proposed new powers will operate in practice and some guarantees—I use that word deliberately—that they will not be used arbitrarily to put undue pressure on legitimate taxpayers.
	The background to all this is the merger of the Inland Revenue and Customs and Excise, which was brought about by the Commissioners for Revenue and Customs Act 2005, which received Royal Assent on 7 April 2005. Before the merger which created Her Majesty's Revenue and Customs, the two heritage organisations had different roles and different powers accordingly. HM Customs and Excise has historically had relatively strong powers, including powers of arrest and seizure, which evolved from its role in fighting smugglers and more latterly drug traffickers. Before the merger, those powers were based on the Police and Criminal Evidence Act 1984, or PACE as it is more generally referred to, and specifically section 114, which conferred specialist powers on Customs and Excise officers to help to fight crime.
	In contrast, the Inland Revenue was equipped with more restricted powers designed predominantly to help it to combat so-called white collar crime in areas such as financial services and the deliberate evasion of tax. Importantly, however, Inland Revenue officers did not usually have any powers of actual arrest and needed to be accompanied by a police officer if and when that became necessary.
	In the spring of 2006, the Treasury initiated a consultation process on how the powers of the two heritage organisations might effectively be combined. There have now, in fairness, been three separate consultation documents relating to that process, including a second technical consultation in August 2006 and a third revised consultation in January this year. The consultation included a draft copy of the statutory instrument that the Government intend to use to initiate the powers contained in part 6 of the Bill. Therefore, we accept that the change has not come out of the blue and that the Treasury has received a considerable number of responses that have led, at least in part, to the drafting of part 6.
	Given that, we are not opposed in principle to combined powers for HMRC. Our concern is the extent of such powers and how they are likely to be employed in practice. The Treasury has apparently sought to reassure the professional bodies that those powers, including that of arrest, will be used sparingly; but, importantly, few such guarantees are stated in the Bill. My party is by no means alone in being concerned. The Chartered Institute of Taxation, in a consultation response of 16 February this year, stated:
	"We continue to believe that, as a matter of principle,. HMRC should have civil powers to administer tax, whereas criminal matters should be for the police. We do not see any conflict between this and the need to ensure appropriate powers are available to tackle MTIC fraud and other attempts to steal from the taxpayer."
	It went on that if HMRC is given the powers,
	"the issue becomes one of ensuring those powers are used only by those who need them, and are subject to proper control."

David Heath: I have a great deal of sympathy with what the hon. Gentleman is saying: there is a need to identify which officers have arrestable powers. I am, however, concerned about amendment No. 20. It appears to preclude a Customs officer at a port of entry having powers of arrest unless he is a member of the criminal investigations directorate; otherwise, he would need to be with a person in the office of constable to effect an arrest. That cannot be what the hon. Gentleman intends.

Mark Francois: I take on board the hon. Gentleman's point, but it would be up to HMRC to decide where to deploy its CID officers. Also, there are usually police officers available at most ports.
	In a more recent note produced after the publication of the Bill, the Chartered Institute of Taxation argued:
	"We have had assurances that the use of the powers will be restricted to a small cadre of people, properly controlled and trained. There does not seem to be anything to give effect to that promise in the legislation—why not? It would be preferable to have such powers included in the legislation, rather introduced by 'administrative procedures'."
	The Institute of Chartered Accountants in England and Wales, in its parliamentary briefing of 24 April, said:
	"It is vital that HMRC make publicly clear the circumstances in which the powers of arrest will be used...In order for Parliament to properly debate these clauses, the promised statement of practice should be made available to coincide with the debate."
	It added:
	"Fundamentally, we question whether HMRC ought to have criminal investigation powers at all. We think that serious organised tax crime ought to be dealt with by the Serious Organised Crime Agency (SOCA) in the same way as any other organised crime."
	The Law Society reflected those concerns in its parliamentary briefing of 20 April when it said:
	"HMRC have made significant efforts to separate out functions so that criminal investigation activity is not confused with civil investigation activity and separate personnel are involved...There is no statutory basis, however, for this separation of functions: it may be appropriate to consider whether there should be a separation."
	It was also concerned that
	"In the adoption of PACE under the statutory instrument no particular grade of officer is specified to exercise the powers...There is no statutory basis for the separation of criminal from civil powers within HMRC...HMRC have taken these issues seriously but it may be appropriate for a legislative framework to exist as well."
	The Professional Contractors Group, which represents many small businesses including in the IT sector, stated:
	"The culture of tax inspectors is becoming increasingly aggressive and destructive, and less concerned with the law."
	With regard to the proposed criminal powers, the PCG states:
	"PCG calls for clarification over when new powers will apply, a guarantee that they will never be used as part of routine compliance work and for this guarantee to be enshrined in statute. This separation must be as solid as possible and not liable to be eroded either by the misapplication of powers by inspectors or by any future administrative reorganisation within HMRC."
	PricewaterhouseCoopers has argued—in a response to HMRC's consultation of 14 February 2007, given by its partners John Whiting and Tom Cawdron—that
	"the use of powers must be separate from procedures for civil investigations...Criminal gangs allegedly committing MTIC fraud and tax credit fraud on a vast scale need to be tackled with an appropriate degree of tax specialist support. We believe that it is a mistake for tax officials (using the word 'tax' in the widest sense) who may return to a normal tax environment at the end of their spell of duty in RCPO to investigate such organised crime."
	Given all those serious concerns, can the Minister now provide Parliament with some specific on-the-record assurances about how these powers will be exercised in practice? First, who can exercise the powers and how limited will their exercise be within HMRC? Our amendment No. 20 argues that the ability to exercise them should be confined to HMRC's criminal investigations directorate, which specialises in fighting fraud and criminal activity but does not ordinarily deal with day-to-day tax affairs. That might help reassure taxpayers, including businesses, that HMRC will not use the threat of powers of arrest as leverage in ordinary tax disputes.
	The regulatory impact assessment that accompanied these proposals, under the heading "Training given to HMRC officers", states:
	"The structure of HMRC with a separate Criminal Investigations Directorate, ensures the same officers do not deal with both criminal and non-criminal investigations. Officers responsible for criminal investigations will receive all the relevant training and will not have any other duties such as carrying out routine compliance work".
	However, the RIA is not part of the Bill, which in clause 81(9)(2)(a) states:
	"A certificate of the Commissioners that an officer of Revenue and Customs had authority under subsection 2(e) to exercise a power or function conferred by a provision of this Act shall be conclusive evidence of that fact."
	Given that apparent dichotomy, can the Minister assure the Committee this evening that the powers in part 6 of the Bill will be exercised only by officers of HMRC's criminal investigations directorate, and not by other, wider elements of the organisation, as well?
	Secondly, in what circumstances will the powers be used? It is important to establish that such powers should be used only to fight suspected fraud or other related crime, and not as leverage in ordinary day-to-day tax disputes. What is important is not just the power of arrest but the threat of its use. It would be quite wrong for HMRC officers—a number of whom are now incentivised regarding the annual revenue that they are targeted to bring in—to use the threat of arrest by HMRC as leverage in a tax negotiation in which there is no real suspicion of fraud or other criminality. What assurances can the Minister give the Committee that that will not be allowed to happen, and that potentially overzealous tax inspectors will be kept in check if these powers are granted?
	Let us consider some simple instances. Can the Minister assure us that an individual who makes a genuine mistake on their annual tax return, even if it is in their favour, will not be threatened with arrest? Similarly, can he assure us that a small business that is experiencing genuine cash flow problems, and which is therefore having difficulty meeting its tax payments, will not have its partners or directors threatened with arrest as a result? We also presume that someone who is in dispute with HMRC over an attempt to recover an alleged tax credits overpayment—there were a third of a million such people last year—will not be threatened with arrest in any circumstances, save where there are reasonable grounds to suspect that they have been involved in an organised attempt to defraud the system? Conversely and for the record, we do expect such powers to be used in fighting organised fraud such as MTIC fraud, which is costing the UK taxpayer billions of pounds a year.
	Thirdly, when will the specific guidance that relates to the operation of the powers be issued. The RIA, under the heading "Communication of the changes", states:
	"HMRC has undertaken to publish material setting out information on which officers are entitled to use criminal investigation powers, how that work is organised in HMRC and how the powers are organised."
	As I have already stated, the draft order to implement part 6 of the Bill has been published, but when I checked with both the Library and HMRC this afternoon, the specific guidance about the implementation of the powers in practice, as opposed to just the powers themselves, had still not been published. It would, obviously, have been very helpful to have that information before the House before today's debate.
	In addition, it should be borne in mind that even when we do have such information, it will still only be in the form of guidance, or some form of code of practice as—in fairness—has been suggested by the Liberal Democrats in amendment No. 18, and so will not be on the face of the Bill.
	Similarly, the RIA, under the heading "Implementation and delivery plan", also states:
	"The changes being made come into force according to an order to be made by the Treasury. The order will not be made until the training has been rolled out appropriately."
	The Treasury has already published the draft order as part of the consultation, but without a potential implementation date. So assuming for a moment that the Bill receives Royal Assent before the summer recess, when is the order intended to be made, and is the Treasury confident that all the relevant training will have been completed by that time?
	In summary, we can understand why the Government might want to do this, following on from the HMRC merger. We accept that they have carried out a consultation exercise in advance of seeking to codify these combined powers in part 6 of the Bill. Nevertheless, we remain concerned by the extent of these powers and, specifically, how they might be exercised in practice. The concern spreads wider than just the Opposition. It includes the Chartered Institute of Taxation, the Institute of Chartered Accountants in England and Wales, the Law Society, the Professional Contractors Group and respected members of the accounting profession, including those from PricewaterhouseCoopers.
	Parliament must be reassured that the powers will not be used arbitrarily and that HMRC officials will not use them or threaten to use them simply as leverage in tax negotiations. We have already seen a significant hardening of HMRC's attitude in respect of the adjudication of tax credit overpayments and we are concerned that such a hardening in other areas could take place once the new powers have been granted to the combined organisation.
	To this extent, we have proposed two amendments to limit the exercise of such powers to a finite number of specially trained officers—amendment No. 2—or to those working specifically in the criminal investigator's directorate at HMRC, which is amendment No. 20. I shall listen carefully to the Minister's reply before deciding which, if either, of the amendments to press to the vote.

Julia Goldsworthy: The full RIA outlines the necessary balance to be struck between meeting HMRC's needs and making the provisions consistent with PACE 1984, and safeguarding citizens. Amendments Nos. 2 and 20 make much sense, although amendment No. 2 makes more sense than amendment No. 20. If one is pressed to a Division, we would be more inclined to support the former.
	Amendment No. 2 makes sense because it outlines clear requirements for training, supervision and numbers. I would be interested to know where the hon. Member for Rayleigh (Mr. Francois) got the number of 500 from, but it can be amended by order if it is not right, and that makes sense. It is also sensible to ensure that HMRC has to report back on the issue in its annual report. We need change, because PACE 1984 relies only on Customs and Excise and we do now have a merged organisation.
	Amendment No. 18 reflects our concerns that we are debating these powers without being clear about how they will be exercised, the circumstances in which they will be exercised and who will exercise them.
	With any other Bill, the Government would have other opportunities—such as before it went to the Lords, for instance—to lay the code before the House, but the fact that this is the Finance Bill means that we will not have another chance to debate the matter after tonight. Moreover, we are holding the debate blind because we do not have the code, and that is why the amendment would ensure proper time for appropriate parliamentary scrutiny of this matter.
	At the very least, I hope that the Minister will be able to assure the House that appropriate parliamentary time will be set aside to debate the code, when the Treasury makes it available. Although amendment No. 2 is better than No. 20, we cannot support it because, in reality, it is possible that only one officer will be present when an arrest has to be made. PACE was supposed to make sure that an arresting officer would be available when an arrest had to be made, so I hope that the Minister will respond to the proposition in our amendment No. 18.

John Healey: I hope that my response will give the reassurances that the hon. Members for Falmouth and Camborne (Julia Goldsworthy) and for Rayleigh (Mr. Francois) are looking for. The new powers in clause 81 and those that follow it are very important, and I hope that what I say will expedite the business on those further clauses.
	The Bill is designed to improve HMRC's ability to respond to serious criminal attacks on the UK's tax and tax credit systems. HMRC's criminal investigation powers will be based on the modern standard already set by Parliament for other agencies facing similar threats—that is, the Police and Criminal Evidence Act 1984. That Act is well understood by courts, lawyers and law enforcement agencies. It has been in force for more than 20 years, and the former Lord Chief Justice, Lord Wolff, has said that it is central to the working of the criminal justice system. He said that it reflects Parliament's intention as to what should be the balance between the necessary protection of the rights of the individual citizen and the right of the public as a whole that those who commit crimes should be convicted and then punished.
	That is precisely what the 1984 Act's incorporation for HMRC is designed to do. As the hon. Member for Rayleigh said, it follows the merger of Inland Revenue and Customs and Revenue in 2005, which is when my right hon. Friend the Paymaster General launched the major review of powers. That review involved wide consultation about the powers and deterrents available to HMRC, and about the safeguards available to taxpayers.
	Two elements of this year's Finance Bill cover criminal investigations and civil penalties that emerge from that review of powers. The proposals are based on extensive consultation that included discussion with the review's consultative committee of independent experts. In addition, there were three public consultation exercises, and meetings with representative bodies and legal experts from across the UK.
	There was a time when the tax authority was a less obvious target for organised criminal attacks, but the threat of organised financial crime is now considerable and serious in both the public and private sectors. The MTIC fraud mentioned by the hon. Member for Rayleigh, and the organised criminal attack on the tax credit system that included the theft of thousands of identities from unsuspecting employees, are just two examples of what can happen. Staff at HMRC are uncovering serious criminal activity across a range of the agency's duties, and the globalisation of trade and financial services is enabling criminals to scale up the amounts involved in complex business frauds.
	As a result, HMRC must have modern and effective powers to respond to the changing nature of the criminal threat. However, many of the powers inherited from the Inland Revenue and from Customs and Excise are no longer suited to that purpose. Furthermore, misalignment between the powers leads to confusion; for example, under existing legislation, an HMRC team investigating a case of fraud that covered direct and indirect tax would need two separate warrants to search premises, two separate teams to undertake the search and, if arrests were made, the suspect might have to be arrested twice—once by an HMRC officer for the indirect tax fraud and once by the police. Clearly, that is nonsense and undermines the advantages of the alignment and modernisation that Parliament approved in the merger to create a single UK tax authority.
	The majority of responses to our consultation recognised the importance of consistent powers for all tax fraud investigated by HMRC and supported adoption of the relevant parts of PACE as a sensible way to achieve that. The Law Society of England and Wales supported the adoption of PACE on the principle that
	"the powers should so far as possible be consistent with powers available to other agencies dealing with criminal offences."
	The hon. Member for Falmouth and Camborne expressed concern about mission creep. Not all the PACE powers will be applicable to HMRC; indeed, the provisions we are debating would give HMRC access to only about one third of PACE. Powers not appropriate to the tax authority are not included; for example, PACE stop and search provisions and the powers to take fingerprints and to charge and bail suspects would not be available to HMRC. However, bringing HMRC criminal investigations into PACE would ensure that all the safeguards enshrined in that legislation are directly applied to those investigations. PACE codes of practice would apply to HMRC; they set out important safeguards, including that the powers of entry, search and seizure must be fully justified before use and that officers must consider less intrusive means before applying for search warrants.
	Some people have argued that the exercise represents a levelling up of old Customs powers to the Revenue. That is not the case. In some instances, the provisions would introduce higher thresholds and stronger safeguards; they also mean a narrowing rather than an extension of the number of HMRC officers who can exercise the powers. The power of arrest would be restricted to authorised officers with the necessary training, who needed to perform an arrest in the course of their duties. That will mean removing the power of arrest from about 18,000 ex-Customs officers who at present have the power but no operational need to use it.
	Some Members expressed concern that criminal and civil matters would get mixed up. I assure them that the law makes it clear that the powers we are considering can be used only where it is reasonable to suspect that a crime has been committed and only for the purposes of a criminal investigation into that crime. None of the powers can be used for civil matters. No HMRC officer is responsible for both civil and criminal inquiries. The only guidance not yet published by HMRC is on the detail of the training courses officers must complete before they are authorised to use the powers. As promised, the guidance will be published before any powers come into effect.
	Subsections (2B) and (2C) of amendment No. 2 seem to be intended to ensure that PACE powers are used only by HMRC officers who are properly trained and authorised. However, that objective is already ensured by the clause. Under subsection (8) and the draft regulations applying PACE to HMRC, which were published on 2 April, PACE powers and functions are available only to HMRC officers authorised by the commissioners. Under administrative law, the commissioners may delegate functions only to properly trained and supervised officers, and only officers who need to use those powers to carry out their duties will be authorised.
	The procedures for ensuring that the rules for authorising officers are applied correctly are subject to independent inspection by Her Majesty's inspectorate of constabulary. It is correct that none of the powers will be made available to officers of HMRC who carry out more routine duties such as checking tax returns. By restricting the powers to those officers within HMRC who have a direct business need, the number of officers with the power of arrest will be reduced from a current total of about 24,500 to 6,500—a reduction of less than a third and more than a quarter. Those 6,500 include 2,000 criminal investigators and about 4,500 officers working to protect the UK's borders, as mentioned by the hon. Member for Somerton and Frome (Mr. Heath). Those officers need the powers to carry out their duties.
	That brings us to subsections (2D) and (2E), which are designed to limit the number of HMRC officers able to use PACE powers to 500—a figure that could be varied by order. Frankly, that is a ridiculous proposal and a random number. HMRC currently has 1,500 officers trying to tackle MTIC fraud, about 500 of whom have access to criminal investigation powers. The amendment would mean that the 200 criminal investigation officers tackling tax credit frauds, another 160 officers working on complex business fraud, 500 combating smuggling and about 230 tackling criminal finance and money laundering would simply be prevented from exercising their duties. That would certainly apply without the constraint of the constant legal amendments required to do so. What is important for the Committee to note is that the powers are available only to trained officers who need them to carry out their duties, who work in the relevant sections of HMRC and whose work is properly supervised and inspected.
	The hon. Member for Rayleigh may be aware that PACE provisions already require statistics to be kept and published. HMRC will in future continue to meet the relevant standards set by PACE as applied to all law enforcement agencies and then exceed them by continuing to publish a much wider range of statistics than it does currently.
	Amendment No. 18, and the requirement to prepare codes of practice relating to the exercise of powers, is also unnecessary. PACE codes of practice have been approved by Parliament and are available to the public. Clause 81, as drafted, applies those codes directly to HMRC's criminal investigations.
	Finally, on amendment No. 20, the hon. Member for Somerton and Frome was again correct that it would restrict the exercise of PACE powers of arrest to officers currently and exclusively serving in the criminal investigation directorate. Although they require the power of arrest, it is also needed at the frontiers. It is obvious that officers at the frontier need to be able to arrest smugglers, where appropriate, as they are detected entering or leaving the UK. Officers carrying out that work are based in HMRC's detection directorate rather than its criminal investigation directorate.
	On that basis, I hope that the hon. Members for Rayleigh and for Falmouth and Camborne feel that they have had their reassurances and that the hon. Gentleman will not press any of his amendments. If he does, I shall have to ask my hon. Friends to resist them.

Mark Francois: I have listened very carefully to the Minister's case with regard to these important powers. He explained the background to what Her Majesty's Treasury is seeking to achieve. Conservative Members appreciate the need to combat fraud, especially highly organised fraud against elements in our VAT and tax credit systems. I am grateful for the Minister's assurance that the powers will be used only for criminal, not civil, matters. That is an important assurance placed on the record in  Hansard tonight .
	Nevertheless, the number of officers that the Minister mentioned as having been given these powers was 6,500. I understand, however, that in the Treasury's discussions with the professional groups, the limit was originally specified as 1,000. Then when the Treasury was pressed, it conceded that the figure might, at most, be 2,000. Now the Minister comes to the House and asks for 6,500 of these officers to be so empowered to arrest our citizens. We on the Conservative Benches feel that we need to place some constraint on that. We think that it is right that the powers should be given to specialised officers within HMRC, who are specially trained to use them.
	Having listened to the Minister, I am minded to withdraw amendment No. 2, but to press amendment No. 20 to a vote, so that the powers would be confined to specially trained officers in HMRC's criminal investigations directorate and HMRC could then choose to deploy some of them at the border posts if it saw fit. If the Minister thinks that he can tell the professional groups that there will be only 1,000 officers, then that there will be at most 2,000, and then come to the House and say, "Oops. I actually meant 6,500", he should know that we think that perhaps he has not behaved as well as he might.
	I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.
	 Amendment proposed: No. 20, page 57, line 12, at end add—
	'(12) Any power of arrest conferred by a provision of this Act as it amends section 114 of the Police and Criminal Evidence Act 1984 shall, so far as it is exercisable by an officer of Her Majesty's Revenue and Customs, only be exercised by an officer or officers serving in the Criminal Investigation Directorate of HMRC.'.— [Mr. Francois.]

Question put, That the amendment be made:—
	 The Committee divided: Ayes 118, Noes 279.

Question accordingly negatived.
	 Clauses 81 to 83 ordered to stand part of the Bill.
	 Schedule 22 agreed to.
	 Clause 84 ordered to stand part of the Bill.
	 Schedule 23 agreed to.

Clause 20
	 — 
	Income tax exemption for domestic microgeneration

Julia Goldsworthy: I beg to move amendment No. 15, in page 15, line 10, leave out sub-paragraph (b).

Alan Haselhurst: With this it will be convenient to discuss the following: clause 20 stand part.
	Amendment No. 16, in clause 21, page 15, line 29, leave out sub-paragraph (c).
	Amendment No. 17, page 16, line 5, leave out sub-paragraph (c).
	Clause 21 stand part.
	New clause 1— Microgeneration etc.
	'(1) The Chancellor of the Exchequer must, within one year of the passing of this Act and annually thereafter, prepare and publish a report on such fiscal measures he considers appropriate to assist with—
	(a) microgeneration;
	(b) energy efficiency; and
	(c) small scale local energy generation.
	(2) In preparing the report under subsection (1), the Chancellor of the Exchequer shall take reasonable steps to consult local authorities and such persons as in his opinion have an interest in—
	(a) enhancing the United Kingdom contribution to combating climate change; and
	(b) alleviating fuel poverty.
	(3) In this section—
	"microgeneration" has the same meaning as in section 82 of the Energy Act 2004;
	"small scale local energy generation" means generation of energy—
	(a) in the case of electricity, generation by plant not exceeding 20 megawatts, and
	(b) in the case of heat, production by plant not exceeding 100 megawatts thermal.'.
	And the following amendment thereto: (a), in subsection (2), after 'persons' insert
	'including, in particular, Government Departments'.

Julia Goldsworthy: Although we are covering quite a lot in this group of amendments, I shall try to be brief.
	I begin by referring the House to comments made on Second Reading by the hon. Member for Wolverhampton, South-West (Rob Marris), who is not in his place at the moment, about the need for a carrot as well as a stick in encouraging environmental behaviour. The amendments and the new clause relate to clauses 20 and 21. In the Budget, it was announced with a great fanfare that people who produce electricity on domestic property through microgeneration would be exempt from income tax and, furthermore, that that exemption would extend to the sale of renewable obligations certificates. That announcement included income tax as well as any capital gains tax that people might otherwise have been liable to pay.
	Paragraph 7.43 of the Red Book states:
	"as announced in the Pre-Budget report, Finance Bill 2007 will legislate so that, where an individual householder installs microgeneration technology in their home for the purpose of generating power for their personal use, any payment or credit they receive from the sale of surplus power is not subject to income tax".
	The Red Book goes on to explain the freedom from income tax and capital gains tax for ROCs.
	Those measures in the Budget were accompanied by another announcement in the Chancellor's speech of further investment in the low-carbon buildings programme and that grants for the installation of microgeneration technology will be increased by another £6 million. That announcement was in response to the massive popularity of the scheme, which was demonstrated by events on 1 March 2007 when the domestic grant allocation went on the first day of the month. I see that you are looking at me somewhat quizzically, Sir Alan. That point relates to our amendment (a) to new clause 1, which I will explain in due course—I promise you that I shall be brief, Sir Alan. Rather than increasing capacity, those events led to the suspension of the low-carbon buildings scheme for April. To date, the scheme is still not up and running.
	Amendment (a) would introduce into new clause 1 a requirement on the Chancellor to consult Departments. We tabled the amendment because the low-carbon buildings programme and the extension of funding to it was such a mess. Perhaps the Treasury did not inform the Department of Trade and Industry that it was planning to make such a generous offer, even though the industry itself had asked for an extra £15 million to deal with the popularity of the scheme. Because the DTI was not informed, the programme has been suspended rather than extended, and capacity has been reduced as a result, because members of staff are being laid off as a result of the suspension.
	On the face of it, the provisions appear to fulfil the principle that the Chancellor outlined in his Budget speech, but there are significant limitations in terms of the qualifications placed on the exemption from income tax. Clause 20(1) says:
	"No liability to income tax arises in respect of income arising to an individual from the sale of electricity generated by a microgeneration system".
	Paragraph (a) says that it must be domestic microgeneration. That seems fair. However, paragraph (b) says that it must be the case that
	"the individual intends that the amount of electricity generated by it will not significantly exceed the amount of electricity consumed in those premises."
	The phrase about intention as to the amount of electricity generated crops up again in clause 21 in relation to obligation certificates. The exemption from income tax applies only if someone intends not to generate more electricity than is required.
	The point of the amendments is to ask the Minister why he thinks it necessary to include that qualification, given that the existing definition of "microgeneration" makes clear the limits of the income tax relief. Section 26 of the Climate Change and Sustainable Energy Act 2006 says that
	"'microgeneration' means the use for the generation of electricity or the production of heat of any plant".
	It then lists the sources of energy and technologies that must be used through microgeneration systems: biomass, biofuels, fuel cells, photovoltaics, water, wind, solar power, geothermals and combined heat and power systems. It also defines the capacity by a microgeneration system: 50 kW for the generation of electricity and 45 kW thermal for the production of heat. Given that, why is it necessary to introduce a further qualification whereby an individual installing a domestic microgeneration system has to intend that they are not going to exceed significantly the amount of electricity consumed?
	If it is blowing a gale in the middle of the night, does that mean that the energy production of someone with a wind turbine will significantly exceed their requirements and they will therefore be unable to extend their exemption from income tax to the electricity generated in that situation? Surely we should be encouraging people to maximise the capacity of their microgeneration systems so that we are not placing such great demands on the national network and on non-renewable energy sources. I do not understand why the Treasury thinks it necessary to introduce the qualification with regard to intention.
	There is a practical issue as regards how the exemption from income tax will be measured and achieved. I notice that the Red Book contains no projections of the cost to the Treasury of providing it. Friends of the Earth raised a concern that it does not understand how its achievement can be physically measured. It said that, if the exemption were part of a wider scheme, with a roll-out of smart meters, it would be easier to do something. The chief executive of Scottish Power said that the policy would be meaningless without a wider roll-out of smart meters. Does the Chief Secretary intend to make the policy more meaningful?
	We are worried that the policy constitutes spin over substance. Organisations such as Friends of the Earth would have liked a package of measures to encourage microgeneration, not to limit it in the way in which the Bill does. I am worried that, in the case of climate change, a token gesture is worse than doing nothing because it fools people into believing that action is being taken, when it is actually limited. We do not know whether the income tax exemption will cost the Treasury anything. That shows its small scale given the few people who will benefit from it.
	New clause 1 would provide for a package and extend the scheme to small-scale local energy generation. It would also create a sense of accountability by providing for the preparation of a report to show that the Government are consulting local authorities and other relevant bodies. We will support the new clause, which would provide for a wider approach.
	Amendment (a) to new clause 1 would allow for consultation to include other Departments. One would believe that that was a given in any Treasury consultation, but the experience of the low-carbon buildings programme and this year's fiasco suggests that it needs to be clearly set out to ensure that it happens.
	The amendments and the new clause propose comprehensive changes and signal a more strategic approach, which would significantly improve the scheme. I hope that they will help provide greater stability to schemes such as the low-carbon buildings programme and other cross-departmental work. They are reasonable proposals and I hope that the Chief Secretary will accept them.

Alan Simpson: I wanted to speak briefly to support new clause 1, which addresses Treasury reporting on energy efficiency matters and microgeneration. I tabled the same amendment last year and I want to make it clear that it has cross-party support, which was reflected in the Climate Change and Sustainable Energy Act 2006. That had the support of the whole House.
	The key weakness in our current approach to reporting is that there is a range of departmental responsibilities, involving the Department of Trade and Industry, the Department for Communities and Local Government and the Department for Environment, Food and Rural Affairs, but in each case, the policies hit a brick wall in the absence of a commitment from the Treasury to be part of the reporting mechanism about fiscal measures, which promote microgeneration and energy efficiency. That is a glaring gap in the coherence of our approach to climate change policies.
	In other parts of Europe, Finance Ministries have been at the heart of driving climate change programmes and commitment to the shift to microgeneration and renewable energy. They have done that by placing themselves at the centre of parliamentary and democratic accountability. Yet whenever the matter has been raised in the House, the Treasury has refused to accept the reporting responsibilities that it quite happily places on other Departments.
	There is a central point for the Committee to grasp: unless our climate change policies and the accountability for them are driven by the centre, we will not get the take-off points that will shift our economy into seriously promoting microgeneration, renewable energy and energy efficiency. That will not happen if there is a gap at the centre. I put it to Treasury Ministers that it is not enough to give the lead in policy pronouncements, or to be first off the blocks with the press releases. They need to be first out of the frame when it comes to holding themselves to account in such a way that we could then expect other Departments to follow suit. I make a plea to them that this should not be done in a way that will divide the House along party lines. It can be achieved with cross-party consensus, and if we were to do that, the whole House and the whole country would welcome it.

Paul Goodman: I am looking for a sentence that will sum up the what the official Opposition feel about clauses 20 and 21, about new clause 1, about the Liberal amendments to the clauses and to new clause 1, and about what the hon. Member for Nottingham, South (Alan Simpson) has just said. That sentence is: "The Red Book only takes us so far." It takes us only so far in relation to the two clauses before us because, although they are microgeneration measures—they are welcome, and we do not intend to oppose them—page 177 of the Red Book does not tell us how effective the Treasury expects them to be. In other words, it does not say what it expects the incentive effects of them to be over what period of time, or how many extra microgeneration systems the Treasury expects to be installed by how many people over what period of time. The House would like to have that information.
	The theme of the limitations of the Red Book brings me to new clause 1. Last year, this measure was proposed as new clause 9, and I pay tribute to the hon. Member for Nottingham, South for drafting it. It was voted on last year, and supported by the hon. Gentleman and other Labour Members, as well as by us and the Liberals. It was a good new clause, and it is worth returning to it this year, which is why we have re-tabled it.
	I have all the quotes from the speech that the hon. Gentleman made last year, but I am not going to quote him; he is perfectly capable of speaking for himself. His argument, in essence, is that the Treasury is the powerhouse. It has been powerhousing domestic politics since the war, and it does not grow any less powerful as the years go by. Indeed, under this Chancellor, it is growing more powerful. If the microgeneration drive is to be taken seriously, we do not simply need the description of what the Government are seeking to do, as outlined on page 177 of the Red Book. We need an annual assessment of how effective their strategy is, of its framework, of the take-up of the measures and of whether that take-up is successful. When the Financial Secretary responded to the debate on the proposal last year, he did a very workmanlike job, as he always does. He referred us back to the Red Book, but there is a prevailing feeling in the House now that that simply will not do if the Treasury is to drive this strategy forward.
	I agreed substantially with what the hon. Member for Falmouth and Camborne (Julia Goldsworthy) said about these proposals. She made a good case for her amendment to our new clause, and we certainly have no difficulty with it. She also asked the Minister some pertinent questions about the necessity of the subsections of the two clauses that would apparently limit the amount of energy produced by microgeneration. I shall not repeat her questions; I shall simply ask the Chief Secretary to respond to them in due course, and to give us some reason to believe that the Treasury really is going to put itself in the driving seat in relation to microgeneration, rather than leaving it to other Departments that do not have the Treasury's muscle.

Stephen Timms: We have had some interesting comments on the clauses.
	Clause 20 builds on incentives already introduced to encourage development and growth in the take-up of microgeneration by householders, such as the DTI low-carbon buildings programme, to which the hon. Member for Falmouth and Camborne (Julia Goldsworthy) referred, and a reduced rate of VAT on the installation of microgeneration systems. As she said, my right hon. Friend the Chancellor announced in the Budget a further £6 million for the low-carbon buildings programme for households, bringing the total to more than £18 million for the coming year. We see that as a contribution towards a transition to a more mature market—one that is not dependent on grants—for microgeneration in the future. I reassure her, however, that the programme of household grants will resume allocation in May.
	Clause 20 removes a genuine barrier to the take-up of microgeneration by householders, and helps them to contribute to the reduction of carbon emissions. Let me explain how the barrier arises and how the clause addresses it. I hope that I will then be able to explain why the amendment is inappropriate.
	Households that have invested in microgeneration will often produce more electricity than they require for their own use. Therefore, they have the opportunity to sell or export surplus electricity back to their energy supplier, and so earn additional income. In our discussions with the industry and environmental groups, it became clear that uncertainty about the tax treatment of that income has discouraged some householders from investing in microgeneration. I can clarify today that the Government's view is that a tax charge will indeed arise, hence the need to rectify the position and ensure that there will be no income tax charge.
	Therefore, clause 20 introduces a tax exemption for the income that individuals receive from exporting electricity back to their supplier. It ensures that where an individual installs microgeneration in their home to generate electricity for their own use, any payment or credit that they receive from the sale of surplus electricity is not subject to income tax. Therefore, it achieves clarity and certainty for householders and achieves investment in microgeneration in line with the Government's microgeneration strategy.
	The clause is targeted at people whose primary intention is to consume in their home the electricity that they generate. I have suggested to the Committee that it would not be right to extend, as the amendment would, the exemption to everybody. If accepted, the amendment would provide an exemption for businesses selling electricity if they happen to be run by an individual on domestic premises. In the case of businesses, there is no uncertainty, as there is with householders, about the tax position. For businesses, therefore, there is not a barrier to the take-up of microgeneration, so I suggest that the clause does not need to be extended as the hon. Member for Falmouth and Camborne proposes.
	It would be rather peculiar to give incentives to electricity companies to set up power stations, albeit small ones, in people's homes. A business based on commercial microgeneration should pay tax on its profit, just like any other commercial activity. To do as the amendment proposes would be unfair, and addresses a problem—uncertainty about the tax position—that does not exist where the primary purpose is commercial.
	A similar argument applies in the case of clause 21, which deals with renewables obligation certificates, the purpose of which is to certify the generation of electricity from a renewable source. The auction price of renewables obligation certificates has been remarkably stable, at around £40 to £50 per megawatt-hour, since the renewables obligation was introduced in 2002. As intended, it has proved to be an effective market-based mechanism for increasing renewable electricity generation.
	Those using microgeneration at home can receive ROCs in the same way as any other electricity generator. They can sell their certificates to energy companies seeking to fulfil their renewables obligations. In those circumstances, the tax consequences could be complex. Householders could find themselves liable to income tax when they received their ROCs, and to capital gains tax when they sold them. The clause avoids that complexity, and ensures that individuals will not be liable for either tax in respect of ROCs that they acquire for electricity generated through microgeneration in their homes. Together with the income tax exemption in the previous clause, it provides clarity and certainty, along with very a favourable tax treatment of the income that householders receive from microgeneration of electricity.
	Businesses do not face the same barriers to take-up as individuals. I do not consider it appropriate to give a tax exemption to some people pursuing a commercial activity when others competing with them do not have the same advantages. That applies equally to income from ROCs and income from sales of surplus electricity. I hope the Committee will reject that amendment as well.
	I listened with interest to what was said by the hon. Member for Wycombe (Mr. Goodman) and my hon. Friend the Member for Nottingham, South (Alan Simpson) about new clause 1, which would provide a legal obligation for the Treasury to publish an annual report on fiscal measures appropriate to assist with energy efficiency, microgeneration and small-scale generation. The clause is not necessary, because there is already a requirement to produce information on those subjects. The Sustainable Energy Act 2003 requires annual reports on progress towards sustainable energy aims. Last year it was amended by the Climate Change and Sustainable Energy Act 2006 to require the annual reports to include
	"things done during that period for the purpose of implementing the strategy for the promotion of microgeneration in Great Britain",
	a strategy that was published last year. The
	"things done during that period"
	will of course include fiscal changes.
	Details of the environmental impact of Budget measures are published by the Chancellor every year, not once but twice, in both the Budget and the pre-Budget report. They are in chapter 7 of the Red and Green Books, which is dedicated to measures to meet the Government's environmental objectives. The environmental chapter was first included in the 1999 pre-Budget report, and has been a standard feature of Budget and pre-Budget report documentation ever since. That reflects the high priority assigned by the Treasury to environmental matters throughout the past decade.
	The Government are committed to tackling the global challenge of climate change. We have introduced a range of measures to support energy efficiency across all sectors, from heavy industry to individual householders. Energy efficiency is key not only to reducing greenhouse gas emissions, but to helping to reduce fuel poverty.
	I was delighted to hear the hon. Member for Twickenham (Dr. Cable) pay tribute to the climate change levy. Along with the climate change agreements, it has encouraged energy efficiency in industry. It is estimated in this year's Red Book that the levy and agreements will deliver emissions savings of 6.3 million tonnes of carbon a year by 2010. In the domestic sector, we have reduced VAT rates to help households take the most cost-effective steps to improve energy efficiency. Fiscal measures certainly have a role to play in improving energy efficiency, and that underpins a range of steps that we have taken.
	A great deal of work is already being done across Government to encourage energy efficiency, microgeneration and local energy generation. Information on progress is reported regularly. The new clause is not necessary, and while I hope it will not be pressed to a vote, I invite the Committee to reject it if it is.

Julia Goldsworthy: I think that it was the hon. Member for Wycombe (Mr. Goodman) who described the Chancellor as being in the driving seat when it comes to such measures, but unfortunately it seems that the Treasury is trying to look like it is putting the foot on the accelerator, while at the same time it is slamming its foot on the brakes. Unlike the present Chancellor, perhaps his successor will choose to grasp the issue more firmly.
	I am pleased to hear the Chief Secretary confirm that the low-carbon buildings programme allocation will begin in May, but today is 1 May and, as far as I know, the programme is still suspended. It is a matter of concern that it has been suspended for months and that we still do not have a firm date for its proper reinstatement. In the meantime, people whose job it is to increase the capacity of that programme face losing those jobs because the funding stream is not there.
	The clauses provide some clarity about liability for income tax and the fact that there will be an exemption, but I remain concerned about the sub-paragraphs to which the amendments that my hon. Friend the Member for Somerton and Frome (Mr. Heath) and I tabled refer. The matter remains obscure. I am still not clear what the Chief Secretary meant when he talked about the potential for commercial gain. Surely either we want to increase take-up of microgeneration or we do not. If there is an exemption from personal income tax, surely that deals with the commercial issue. If he is concerned about the issue of exceeding the amount of electricity that the household requires, surely that should be a reason to look again at the definition of microgeneration, rather than trying to deal with it as the Bill proposes, which does not seem clear. People who take up the scheme will not know when they have significantly exceeded the amount that they were intended to generate. To what extent is the measure supposed to apply?

Paul Goodman: I just wanted to say that we do not intend to press new clause 1 to a vote tonight. None the less, does the hon. Lady agree that we did not get a full answer from the Chief Secretary and that it will be worth returning to the matter in due course?

Julia Goldsworthy: I agree. I hope that we will be able to return to the issue. I hope that, despite the particular sub-paragraphs to which we have drawn attention, it will be possible to frame the measure in a way that does not constrain the production of energy and heat through microgeneration. Surely that is the whole point of the programmes that are to be introduced. For those reasons, I will not seek to press the amendments to a vote, but I remain unconvinced. I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.
	 Clause s 20  and 21  ordered to stand part of the Bill.
	 Bill reported [ C lauses 1, 3, 7, 8, 12, 20, 21, 25, 67 and 81 to 84,  and S chedules 1, 18, 22 and 23] , as amend ed ; to lie upon the Table.

PETITIONS

Japanese Knotweed

Clive Efford: This petition of residents living in Chelsworth drive and Tuam road in my constituency highlights the growing problem of Japanese knotweed. Responsibility for clearing an infestation where it appears is clearly set out in statute, but that is not the case when the land is bona vacantia. No one has a legal duty to deal with the problem, despite the threat to neighbouring properties, creating a problem for people living in those properties. That problem has existed for those residents for many years. The petition declares:
	The Petitioners therefore request that the House of Commons enacts legislation or statutory instruments that will identify which authority or body is responsible for the clearance of Japanese Knotweed, and provide powers for the House of Commons to enforce such clearance when necessary.
	 To lie upon the Table .

Kent Science Park

Derek Wyatt: I wish to present a petition brought by the Five Parishes Opposition Group and others in my constituency against the Kent science park proposals. I wholeheartedly support the group and its allies, and I have secured three Adjournment debates on this subject. The total number of signatures is 3,200.
	The petition states:
	The Petition of the members of the 5 Parishes Opposition Group and others,
	Declares that the petitioners object to any planning proposal by the Kent Science Park that seeks permission for either one or all of the following: to expand the site beyond the existing security boundary; to build any number of houses on green fields; to construct an A2-M2 road link; and to undertake any other affiliated building works.
	The petitioners therefore request that the House of Commons urges the Secretary of State for Communities and Local Government not to permit the extension of the Kent Science Park beyond its current footprint.
	 To lie upon the Table.

Canvey Island Health Care

Bob Spink: The people of Canvey island are deeply concerned about the two linked issues that this excellent petition addresses. First, they want to ensure that the reorganisation of health care by combining all eight of the GP surgeries on Canvey island into just two centres will not restrict access to primary health care, and that that change will improve health care rather than simply save money at Canvey people's expense. Secondly, they want to retain "The Paddocks" for community use, rather than have it swallowed up in a grandiose central health care scheme. I congratulate the many hundreds of people who signed the petition, and by doing so showed that they care about their community and want to protect vulnerable people.
	The petition states:
	The petition of Eddie Stacy, residents of Canvey Island, Benfleet and others, declares the petitioners' wish to formally record their objection to the PCT's plans for reorganising health care on Canvey Island and further asserts that the loss of "The Paddocks" would be totally unacceptable to the people of Canvey.
	The petitioners therefore request that the House of Commons urges the Government to impress upon the PCT the importance of a public consultation, which is timely and fully informs the public, in order to facilitate the representation of views of all those who will be affected by the changes to current healthcare provisions and who have an interest in the preservation of "The Paddocks".
	 To lie upon the Table.

BRIBERY IN INTERNATIONAL BUSINESS TRANSACTIONS

Motion made, and Question proposed, That this House do now adjourn.— [Kevin Brennan.]

Vincent Cable: I have been fortunate during my years as a Member of this House to have secured a good few Adjournment debates, and I invariably devote them to constituency issues. However, there is another legitimate role that they can perform, which is to raise a series of questions on a topical issue that is difficult to pursue through oral and written questions. I want to follow up a debate that I introduced on 7 February in response to the statement of the Attorney-General about the Serious Fraud Office's decision not to pursue the al-Yamamah investigation.
	There have been several developments since, which I wish to touch on: the March meeting of the committee of the Organisation for Economic Co-operation and Development working group on bribery and what emerged from that; revelations about the American reactions to the British Government decision; and the report this weekend of the Foreign Affairs Committee, which commented on the damage to Britain's reputation. I also wish to look forward to the phase 2 inquiry that the OECD committee will undertake, and to discuss how Britain has applied the OECD anti-bribery convention.
	This difficult issue cuts across several Departments—that of the Attorney-General and the Solicitor-General, the Department of Trade and Industry, the Foreign and Commonwealth Office, the Home Office, the Department for International Development, and, of course, that of the Prime Minister. The responsibilities of the Minister who is to reply to the debate cut across the Foreign Office and the DTI, which are both centrally involved. I have followed his remarks, and he has made some good, strong statements about the British Government's commitment to fighting corruption, notably in his speech in December to the United Nations convention against corruption. He said that fighting corruption was a key priority for the British Government.
	The first of the issues that I want to address is the OECD working group meeting in March. The starting point is that it is the body that oversees the implementation of the anti-corruption convention. There has been an enormous change in the past decade. Some years ago, I served in the Foreign Office and in multinational business, and back then there was an assumption that corruption was part of everyday life in business. That has radically changed since the introduction of legislation that effectively makes it a criminal offence to bribe a public official overseas.
	There are differing views about how Britain has performed in this respect. I have had a useful exchange of correspondence with the Minister's colleague, the Minister for the Middle East, which has brought out the two different aspects of Britain's role. The Minister for the Middle East has rightly argued that in many respects, British business has an admirable record. He has pointed out to me in correspondence that Britain is sixth on the Transparency International index—the so-called bribe-payers' index. Put another way, Britain is second among the G7, just behind Canada. The United States is ninth in the index, Japan is 11th, France is 15th, and Italy is 20th. That reflects well on the ethics of British business. However, I was able to quote to the Minister for the Middle East the comments of the chairman of the working group, Mark Pieth, after the 2005 review; he singled out Britain, Japan and Italy as below standard in the implementation of the convention.
	Unfortunately, this whole argument has become somewhat personalised around Mr. Pieth. The Minister for the Middle East said in his letter to me—it was a public exchange, so I am sure that he will not mind my quoting it—that
	"Professor Pieth's public comments were—as they often are—made in his personal capacity rather than as a reflection of the views of the Working Group."
	However, the working group is quite explicit in its criticisms. It noted after the 2005 inquiry that
	"it is surprising that no company or individual has been indicted or tried for the offence of bribing a foreign public official since the ratification of the Convention by the UK".
	When the working group met last month, it introduced its comments on the United Kingdom in the following terms:
	"At its March 2007 meeting, the OECD Working Group...reaffirmed its serious concerns about the United Kingdom's discontinuation of the BAE Al Yamamah investigation and outlined continued shortcomings in UK Anti-Bribery legislation. It urged the UK to remedy these shortcomings as quickly as possible and decided to conduct a further examination of the UK's efforts to fight bribery."
	The personalisation spilled over, as the Minister knows, into a leading newspaper article last week, in which it was alleged that the British Government had sought to remove Mr. Pieth and had attacked the reputation of the secretary-general of the OECD. I was pleased that a Minister was able to write in very forthright terms dismissing these allegations; I am sure that that is absolutely appropriate. In order to round off this point, will the Minister present make it absolutely clear that the Government have complete confidence in the OECD working group and in its chair, as a necessary background to the inquiry that is due to take place in the next year?
	The second issue is the reaction of the United States, which has always taken the lead on this issue since the introduction in the mid-1970s of its own foreign corrupt practices legislation. Under President Clinton, the American Administration took the lead in trying to create a multilateral agreement—probably primarily to protect American manufacturers and to create a level playing field. The Americans have apparently been leading criticism of the UK within the OECD working party. It was revealed last week by the  Financial Times that a formal complaint, albeit an oral one, had been made in January to the Foreign Office about the termination of the Serious Fraud Office inquiry. If that is correct—I have not heard it denied—can the Minister confirm that the Americans did protest in that way? It is important to be clear on that point. Perhaps the Minister could say how significant that was. For all I know, the Americans may have protested to the British Government about numerous issues over the years, or about very few. Perhaps he could say whether this was seen as a serious gesture by the United States.
	The other development affecting the United States emerged in response to a question that I put to the Solicitor-General on 1 March. I asked him whether meetings had taken place in the past 12 months between the SFO and representatives of the US Department of Justice concerning investigations into al-Yamamah contracts, and he replied:
	"The Serious Fraud Office has met with representatives of the US Department of Justice to discuss case related matters."—[ Official Report, 1 March 2007; Vol. 457, c. 1452W.]
	That implies that the British Government are co-operating with the US in what seems to be a preliminary inquiry into whether there has been a breach of US law in that matter. It would be helpful if the Government confirmed that that is indeed the case.
	The third issue relates to the Foreign Affairs Committee. The debate on al-Yamamah has often taken on a party political colouration, but what was important about the report published at the weekend was that it was an all-party report. Eight Labour, four Conservative and two Liberal Democrat Members produced a consensual report that had two very important conclusions. The first, in paragraph 42, reads:
	"We conclude that the Government's decision to halt the inquiry into the al Yamamah arms deal may have caused severe damage to the reputation of the United Kingdom in the fight against corruption."
	That was the consensus view. I know that Lord Drayson has since contradicted it, but it was an important acknowledgement that serious damage has been caused.
	That damage is of several kinds, including damage to the Government's reputation and to British business in general. In the past few months, leading institutions in the City—for example, Hermes, and the F&C Asset Management Group—have corresponded with the Prime Minister, expressing concern about the way in which their reputations and those of the City and financial markets have been damaged by this affair. Leading business people—for example, the chairman of Anglo—have commented that the reputation of their companies has been indirectly affected. The reputational damage has gone quite far.
	The issue also affects the ability of the British Government to give leadership in the field of overseas development. An excellent White Paper published in 2006 by the Secretary of State for International Development commented extensively on Britain's role in leading the fight against corruption. That is clearly seriously undermined if the British Government are criticised for their performance in implementation.
	The second conclusion of the Foreign Affairs Committee is worth quoting. It notes:
	"There may also be an argument that it"—
	the decision of the British Government in respect of al-Yamamah—
	"has weakened the United Kingdom's ability to take firm action against Saudi Arabia in a range of fields, including human rights."
	The Minister will of course give a considered reaction to the report, but he may wish to give some early indication of his views tonight.
	My final comments relate to where we go from here. Over the next year, there will be a phase 2 inquiry by the OECD working group. It will relate, although not primarily, to one of the issues that has concerned the working group in the past—the state of British law. A view has been expressed that the law that was introduced in 2001 to comply with the convention was simply not fit for purpose. I would be interested to know whether the Minister takes that view. Are the Government satisfied with the law as it stands, or do they feel that new legislation is required to meet the requirements of the convention?
	Phase 2 is not concerned so much with legislation as with implementation of the legislation. Several specific issues will be raised, and I raise them in advance tonight to establish the Government's broad reaction. The first is how seriously the Government are taking further investigations through the SFO. I have had helpful parliamentary answers suggesting that inquiries are continuing in respect of six cases. Those involve South Africa's Hawks deal with BAE Systems, Romania's fighter contracts, the Czech Republic, Tanzania air traffic control, Chilean frigates—a matter that relates to the £1 million alleged to have been paid to the late President Pinochet—and Qatar. It would be helpful if the Minister was able to say whether the British Government are receiving full co-operation from each of the different Governments that are affected. Previous attempts to pursue the investigation in relation to Saudi Arabia were frustrated by a lack of co-operation from the other Governments. If Britain is to follow through on the inquiries, it is important for us to know whether the Governments involved are co-operating.
	My second set of questions relates specifically to the Department of Trade and Industry. The hon. Member for Liverpool, Walton (Mr. Kilfoyle) first brought into the public domain a description of the system of parallel contracts, a type of working relationship in which BAE Systems—and perhaps other companies as well—is involved. Under that system, an official contract is drawn up and published, but a separate and less official contract operates through a subsidiary company with an exotic name such as Red Diamond. That secondary contract arranges for funds to be paid through the British Virgin Islands, where financial disclosure is not required.
	As has been reported many times, that system has been in operation with many of the contracts that have been the subject of controversy, and various individuals associated with BAE Systems have been involved. For instance, I believe that Lord Powell, an adviser to the group, has been involved in—and also been a beneficiary of—such an arrangement.
	I have two questions for the Minister, in his capacity as a DTI Minister. First, is he satisfied that the arrangement involving a subsidiary company is entirely compatible with the system of company law and rules that the DTI oversees? At first sight, it seems odd that companies are able to set up subsidiaries that do not appear in their records, although I am sure that the Department has checked whether that is good practice, or even legal.
	Secondly, are the Government satisfied that moneys can flow through the British Virgin Islands, and is that compatible with the Treasury's rules about money laundering? The working group will pursue those questions, but it will be useful to know the Government's broad approach in advance.
	My final point about the future investigation—which may have started already—has to do with the Government's response to criticisms made in the past by the OECD working group in respect of article 5 of the convention, which specifically excludes commercial considerations when the Government make decisions about whether to proceed with a legal inquiry. The OECD has already expressed concern about the role of the Attorney-General, for the reason that it involves the possible consideration of UK interests that article 5 expressly prohibits in the context of decisions about foreign bribery cases. How such questions are answered will depend on how the working group investigates the decisions about al-Yamamah. It will want to know how the Government separated legitimate considerations of national security from commercial considerations.
	One matter of some concern is that there have been reports that the key individual who communicated the Saudi Government's concerns was Prince Bandar, the former ambassador to the US. He visited this country on November 8, and I am pursuing through parliamentary questions the matter of which Ministers he met at the time to communicate his Government's concern. Unfortunately, the same individual is one of the three main people alleged to have been beneficiaries of the commercial arrangements, together with his father the Crown Prince and the Minister responsible for the air force.
	Questions will be asked, and I am sure that they will be pursued, about how effectively the Government managed to separate the purely commercial aspects of their judgment from the entirely genuine national security concerns. This matter will keep coming back. I apologise to the House for running through the issues so quickly, because of the time, but I am grateful for this opportunity to raise it.

Ian McCartney: As is normal practice, I thank the hon. Member for Twickenham (Dr. Cable) and congratulate him on securing the debate.
	I want to deal with the general principles relating to our position. I feel strongly that not only the hon. Gentleman but others have, in advance of the debate, sought to give the impression that the Government are soft on the issues. In fact, we are involved in a huge array of activities designed to root out corrupt behaviour and bring to justice those who perpetrate it. I shall deal with the concepts, principles and history of what we are doing and will continue to do.
	The hon. Gentleman put a range of specific questions, of which I have had no notice—not that he is required to give me notice. Some of them were based on fact, but some were based merely on innuendo and supposition. I give the House and the hon. Gentleman this commitment: I will review all his questions and if they are not answered by what I say in the next moments—many will not be—I shall respond as effectively as I can by sending answers not only to him but to you, Mr. Deputy Speaker, and by placing them in the Library for the consideration of any Member who is interested in the issues and has concerns.
	Let us first cast our minds back to where we have come from. A decade ago, negotiation of the OECD convention was not complete: the United Nations convention against corruption was not even a glint in the eyes of its founding fathers; Transparency International was a small non-governmental organisation, developing its now world-renowned anti-corruption tools; and the subject of corruption was still almost taboo at international meetings and in aid agencies. Businesses were almost universally shy of recognising that it existed, despite the fact that in many sectors in many countries, especially oil, gas and mining, defence procurement and construction, business depended on it.
	At the same time, corrupt leaders from Mobutu to Marcos and Abacha to Suharto had shown the breathtaking venality that consigned their people to abject poverty while they enjoyed lives of luxury with impunity—all because the international community was yet to take its potential mission seriously, and the world's financial system did not yet have in place the controls that today we regard as commonplace to limit the opportunities for such grand corruption. The Government have played a major part in moving from that scenario to where we are today in practice.
	The House does not need to take that only from me. As the hon. Gentleman rightly and fairly pointed out, Transparency International's corruption perceptions and bribe-payers' indices ranked the UK as the highest and second-placed G7 country, respectively 11th of 160 and 6th of 30. That is many places above the United States and France, which, according to the media reports by which the hon. Gentleman seems to set such store, are our fiercest critics in the OECD. It is not just the Government's view that the UK is doing rather better than many people, including the hon. Gentleman, would have us believe. I shall give the House a few facts to show how distorted and unacceptable that picture is.
	My right hon. Friend the Secretary of State for International Development accounted for much of the work in his progress report to the Prime Minister, published on 12 March. I offer a few examples. First, we continue to push the anti-corruption agenda in international forums, such as the G8, the European Union and the UN, particularly the implementation of the UN convention against corruption, whose provisions on improving international co-operation on asset recovery are particularly important.
	Secondly, we are implementing the third EU money-laundering directive to make it even harder to move criminal money, including looted assets, through our financial system. Thirdly, thanks to funding of £6 million from DFID over three years, in recognition of the impact of the scourge on developing countries, we have strengthened the UK's law enforcement capacity to investigate allegations of foreign bribery and the laundering of corrupt assets by political elites. On the former, the City of London police are already supporting the Serious Fraud Office in five investigations and made arrests in January. On the latter, the UK has restrained £34.6 million of assets acquired through corruption by foreign political elites.
	The Metropolitan police has established a strong operational relationship to bring specific cases to prosecution. The Met's arrest of the former Governor of Bayelsa state had a strong impact in deterring wealthy Nigerians from trying to launder money through London. The Met has also responded to requests from the Nigerian Government relating to a second former state governor. In one case, £1 million was returned and in the other, property bought in London is about to be sold so that the proceeds can be returned to the people of Nigeria from whom they were stolen.
	Let me provide other examples. Following an investigation by the Ministry of Defence police, an MOD official, Michael Hale, after taking bribes from a Californian company, was convicted earlier this month on nine counts of corruption. For the OECD, that case does not count, since the conviction was of the bribe taker rather than the bribe giver, but I stress that it shows that the legal framework and the requirement for the Attorney-General's consent worked as they should. It also showed the judge's resolve to punish such crimes with a custodial sentence.
	Separately, a UK citizen, Joyce Oyebanjo, was convicted earlier this year of laundering £1.4 million of stolen assets from Nigeria. She was sentenced to three years' imprisonment. The Attorney-General has secured an extra £22 million to fund Serious Fraud Office investigations arising from alleged corruption under the UN oil-for-food programme.
	On top of the hundreds of millions of pounds that the Department for International Development has already spent on improving governance in dozens of countries around the world, we recently launched a new £100 million governance and transparency fund to strengthen the ability of civil society, parliamentarians, trade unions and a free media to hold their Governments to account.
	As well as boosting the UK's own capacity to investigate international corruption allegations, we have taken an important role in the International Association of Anti-Corruption Authorities, set up by the Chinese to improve co-ordination and sharing of best practice among anti-corruption law enforcement authorities. Both the Director of Public Prosecutions for Northern Ireland and the director of the Serious Fraud Office will help to direct the organisation. The UK's leadership on the extractive industries transparency initiative has allowed it to become widely recognised as the international standard for the management of public revenues from oil, gas and mining.
	We were also in at the beginning of the conception of the Kimberley process to boost transparency in the diamond trade and stamp out "conflict" diamonds. That is now so successful that it is estimated that more than 99 per cent. of rough diamonds are certified as conflict-free. We continue to work with partners to address outstanding issues, most recently by representing the EU on a review visit to Ghana in March.
	In partnership with the private sector, the UK is now one of only a handful of countries with independent oversight of our national contact point on the OECD guidelines on multinational enterprises. That is an important step towards boosting the credibility of this important complaints procedure. All of these are good examples of the benefits that all parties derive from co-operation between Governments, business and non-governmental organisations.
	We have been praised by the OECD, particularly for the work that we have done to train front-line officials and raise awareness in the UK business community—both here in the UK and around the world. One of the ways in which we have done that is by commissioning a DVD. We are one of few Governments in the world training front-line staff to make them aware of the damage that corruption can cause and what their responsibilities are in helping to find it, bring it to court, stamp it out and bring to justice the people who are perpetrating it in the first place.
	There are many positive stories about how a strong political will and courageous individuals can make a tangible difference. Several other OECD countries have asked us for more details about our activities to help inform their own efforts. That, I must say to the hon. Member for Twickenham, does not show a laggard, self-interested or irresponsible response to the key issues of the day on these matters. His comments therefore bear no resemblance to reality.
	I have spoken about all the things that we are committed to doing to root out corrupt practices—and there are more, which I will set out for the hon. Gentleman in a letter tomorrow. However, I would like to ask him to do one thing for us. Will the Liberal Democrats give back the £2.4 million that they received from Michael Brown, who was jailed for perjury and obtaining a passport by deception so he could go on the run? He is accused of money laundering. I have set out all that we have done, so the hon. Member for Twickenham has a personal responsibility not just to come here and pontificate, but, where corruption arises, to deal with it. I ask him to do just that.
	We are supporting the work of the Nigerian Economic and Financial Crimes Commission to tackle money laundering and corruption. That includes collecting financial forensic evidence in line with international standards and tracking suspicious transactions—a general issue that the hon. Gentleman raised. That has helped to secure 150 convictions and the recovery of about $5 billion since our activities started in 2002. Our work is making a substantial difference.
	Let me leave the hon. Gentleman in no doubt about the UK's commitment to the OECD as an institution. I should say thanks to  The Guardian, despite the inaccuracies and untruths in its front-page article. The article provided me with the opportunity—as he stated—to make it absolutely clear, without any quibble, that the allegations were untrue. They were untrue when they were made and they are untrue now.
	I welcome the opportunity to share and debate policy reform and best practice. The hon. Gentleman raised genuine issues about improving our legislation. I give him a commitment that that is what I want to do, too. I will set out the details—in terms of the questions that it may take some time to answer and the general aspects of what we want to achieve—in a letter to the hon. Gentleman tomorrow.
	We can all improve our performance on these matters. This is a difficult and complex area, but I want to make it absolutely clear that the Government are completely committed to doing the best by the British people and the international community. We are at the forefront of tackling corruption. In the last decade, we have made great strides. We are not squeamish about the role of the OECD. I am talking not just about our peer review, but about what happens in all international communities, whether we are thinking of the Human Rights Council or the OECD. We are very committed to peer review—and that includes ourselves. Every time that there is a peer review, there is an example of improving practice. We accept that.
	We play an active part in the OECD—with the individuals and the institution. We also fund it and put in the right resources to make sure that we have an effective international legislative framework to expose and root out corruption where it exists and to repatriate the resources that corruption sucks out of states that mostly cannot afford to lose those resources in the first place. That money can then be put into education, health, transport and all the other key things that we take for granted in this country. Sadly, many countries that are victims of corruption lose out significantly in those areas.
	I hope that I have reassured the hon. Gentleman on the general issues. As I said, I will deal with the specifics in correspondence.
	 Question put and agreed to.
	 Adjourned accordingly at twenty-seven minutes past Eleven o'clock.